Q3 2023 Phillips 66 Earnings Call

Yeah.

Speaker 1: Welcome to the third quarter 2023 Phillips 66 earnings conference call. My name is Carla and I will be your operator for today's call.

Well compete hard coolers that 2023 Phillips 66 earnings Conference call. My name is call out an opioid crisis with Baker.

Speaker 1: At this time, all participants are in a listen-only mode. Later, we will conduct a question and answer session. Please note that this conference is being recorded. I will now turn the call over to Jeff, Peter, Vice President of Investor Relations. Jeff, you may begin.

At this time, all participants and I listen I mean right now.

We will conduct a question and answer session. Please note that this conference is being recorded I would now.

I'll turn the Kool aid teacher, Pita, Vice President of Investor Relations, Jeff You may begin.

Speaker 2: Good morning and welcome to Philip 66 third quarter earnings conference call. Participant on today's call will include Mark Lazier, President and CEO , Kevin Mitchell, CFO , Tim Roberts, midstream and chemicals, Rich Harbison, Refining, and Brian Mandel, Marketing and Commercial.

Good morning, and welcome to Phillips 66 third quarter earnings Conference call.

Participants on today's call will include Mark Glazer, President and CEO, Kevin Mitchell, CFO, Tim Roberts, midstream and chemicals, rich harvested refining and Brian Mandell marketing and commercial.

Speaker 2: Today's presentation material can be found on the investor relations section of the Phillips 66 website, along with supplemental financial and operating information.

Today's presentation materials can be found on the Investor Relations section of the Phillips 66 website, along with supplemental financial and operating information.

Speaker 2: Slide two contains our safe harbor statement. We will be making forward-looking statements during today's call. Actual results may differ materially from today's comments. Factors that could cause actual results to differ are included here, as well as in RSCC filings. With that, I'll turn the call over to Mark. Thanks, Jeff.

Slide two contains our safe Harbor statement, we will be making forward looking statements. During today's call actual results may differ materially from today's comments factors that could cause actual results to differ are included here as well as in our SEC filings.

That I will turn the call over to Mark.

Thanks, Jeff.

Good morning, and thank you for joining us today.

Speaker 3: We're pleased to report another quarter of strong financial and operating results, and we continue to execute on our strategic priorities to increase shareholder value.

We're pleased to report another quarter of strong financial and operating results and we continue to execute on our strategic priorities to increase shareholder value.

Speaker 3: Our achievements today have enabled us to make significant progress toward the commitments we made to shareholders a year ago at Investor Day.

Our achievements to date have enabled us to make significant progress towards the commitments, we made to shareholders a year ago at Investor day.

Speaker 3: We're confident in our ability to exceed these commitments and will provide an update today. Slide four shows the evolution of our...

We're confident in our ability to exceed these commitments and we will provide an update today.

Slide four shows the evolution of our portfolio.

We're much more than a refining company.

Speaker 3: We are differentiated by an integrated and diversified midstream, chemicals refining, marketing, and specialist portfolio. That generates free cash flow through the economic cycle.

We are differentiated by an integrated and diversified midstream chemicals refining marketing and specialties portfolio that generates free cash flow through the economic cycles.

Speaker 3: Our global commercial supply and trading organization leverages our assets to generate incremental value.

Our global commercial supply and trading organization Leverages, our assets to generate incremental value.

Speaker 3: We continue to execute our strategy to increase more stable cash flows in midstream.

We continue to execute our strategy to increase more stable cash flows and midstream.

Speaker 3: We see more growth opportunities as U.S. natural gas and natural gas liquids production is expected to outpace crude oil.

We see more growth opportunities as U S natural gas and natural gas liquids production is expected to outpace crude oil.

Speaker 3: The demand fundamentals are strong, as NGLs and petrochemical feed stocks remain the fastest growing segment of liquid's demand.

The demand fundamentals are strong as Ngls and petrochemical feedstocks remain the fastest growing segment of liquids demand.

Speaker 3: The DCP acquisition earlier this year strengthened our competitive position by integrating our NGL Wellhead to Market value chain and adds over a billion dollars to mid-cycle adjusted EVA die.

The DCP acquisition earlier this year strengthened our competitive position by integrating our NGL wellhead to market value chain and adds over $1 billion the mid cycle adjusted EBITDA.

Speaker 3: Our current synergy run rate is on pace to deliver more than $400 million.

Our current synergy run rate is on pace to deliver more than $400 million.

Speaker 3: midstream stable cast generation covers the company's dividend and our sustaining capital.

Midstream stable cash generation covers the companys dividend and our sustaining capital.

Speaker 3: will continue to capitalize on our integrated and diversified portfolio to deliver results.

We will continue to capitalize on our integrated and diversified portfolio to deliver results.

Carla: Welcome to the third quarter, 2023, Phillips 66, earning conference call. My name is Carla and I will be your operator for today's call. At this time, all participants are in a listen only mode.

Moving to slide five.

Speaker 3: At our investor day in November 2022, we targeted $3 billion in mid-cycle EBITDA growth by 2025. This included NGO well-hit-to-market, rodeo renewed, business transformation, and CPCam growth project.

At our Investor Day in November 2022, we targeted $3 billion and mid cycle EBITDA growth by 2025. This.

Carla: Later, we will conduct a question and answer session. Please note that this conference is being recorded.

This included NGL wellhead to market rodeo renewed business.

Business transformation and CP Chem growth projects.

Jeff Beeta: I will now turn the call over to Jeff Beeta, Vice President of Investor Relations. Jeff, you may begin.

Speaker 3: Given the substantial progress it employs across the company it made, we are raising the bar.

Given the substantial progress employees across the company have made.

Jeff Beeta: Good morning and welcome to Philip 66, third quarter, earnings conference call. Participants on today's call will include Mark Lazier, President and CEO, Kevin Mitchell, CFO, Tim Roberts, Midstream and Chemicals, Rich Harbison, Refining, and Brian Mandell, Marketing and Commercial. Today's presentation material can be found on the Investor Relations section of the Philip 66, along with supplemental financial and operating information. Slide two contains our safe harbor statement. We will be making forward-looking statements during today's call. Actual results may differ materially from today's comments. Factors that could cause actual results to differ are included here as well as in RSCC filings.

We are raising the bar.

Speaker 3: We now expect to grow mid-cycle adjusted EBITDA by $4 billion between 2022 and 2025, reflecting a $1 billion increase from our original target.

We now expect to grow mid cycle adjusted EBITDA by $4 billion between 2022, and 2025, reflecting a $1 billion increase from our original target.

Speaker 3: This includes additional value from business transformation, midstream synergies, and commercial contributions.

This includes additional value from business transformation.

Midstream synergies and commercial contributions.

Speaker 3: We're increasing the business transformation target to $1.4 billion from $1 billion.

We're increasing the business transformation target to $1 4 billion from $1 billion.

Speaker 3: We're enhancing our commercial capabilities to extract additional value, maximizing return on capital employed and increasing refining market caps.

We are enhancing our commercial capabilities to extract extract additional value.

<unk> return on capital employed and increasing refining market capture.

Speaker 3: We're committing to higher shareholder distributions. Our new target is $13 to $15 billion between July 2022 and year end 2024. This is an increase from our original target of $10 to $12 billion.

We're committing to higher shareholder distributions, our new target is 13% to $15 billion between July 2022, and year end 2024.

This is an increase from our original target of $10 billion to $12 billion.

Mark Lazier: With that, I'll turn the call over to Mark. Thanks, Jeff.

Speaker 3: We will return over 50% of our operating cash flow to Sherville.

We will return over 50% of our operating cash flow to shareholders.

Mark Lazier: Good morning and thank you for joining us today. We're pleased to report another quarter of strong financial and operating results. We continue to execute on our strategic priorities to increase shareholder value. Our achievements to date have enabled us to make significant progress for the commitments we made to shareholders a year ago at Investor Day. We're confident in our ability to exceed these commitments and we'll provide an update today. Slide four shows the evolution of our portfolio.

Speaker 3: Lastly, we plan to monetize assets that no longer meet strategic long-term object.

Lastly, we plan to monetize assets that no longer meet strategic long term objectives.

Speaker 3: Proceeds from monetizing these non-corathets are expected to be more than $3 billion.

Proceeds from monetizing these noncore assets are expected to be more than $3 billion.

Speaker 3: We'll deploy the proceeds to advance strategic priorities, including accelerating cash return to shareholders.

We'll deploy the proceeds to advanced strategic priorities, including accelerating cash returned to shareholders.

Speaker 3: Slide 6 shows progress on distributions to shareholders and improving reviving, revining performance.

Slide six shows progress on distributions to shareholders and improving refining performance.

Speaker 3: We return $6.7 billion through Sherry Purchases and Dividends since July 2022, representing over 50% of operating cash flow during the same time period.

We returned $6 7 billion through share repurchases and dividends since July 2022, representing over 50% of operating cash flow during the same time period.

Mark Lazier: We're much more than a refining company. We are differentiated by an integrated and diversified midstream, chemicals refining, marketing and specialty portfolio that generates free cash flow through the economic cycles. Our global commercial supply and trading organization leverages our assets to generate incremental value. We continue to execute our strategy to increase more stable cash flows in midstream. We see more growth opportunities as U.S, natural gas and natural gas liquids production is expected to outpace crude oil.

Speaker 3: strong-cast generation and discipline capital allocation enabled us to exceed the pace to achieve the original 10 to 12 billion dollar target before year-end 2024.

Strong cash generation and disciplined capital allocation enabled us to exceed the pace to achieve the original $10 billion to $12 billion target before year end 2024.

Speaker 3: The increased target of $13 to $15 billion equates to 25 to 30% of current market count.

The increased target of 13% to $15 billion.

Equates to 25% to 30% of current market cap.

Speaker 3: Our Board of Directors approved a $5 billion increase to our Sherry Purchase Authorization.

Our board of directors approved a $5 billion increase to our share repurchase authorization.

Mark Lazier: The demand fundamentals are strong as NGLs and petrochemical feed stocks remain the fastest growing segment of liquids demand. The DCP acquisition earlier this year strengthen our competitive position by integrating our NGL well hit the market value chain and adds over a billion dollars to mid cycle adjusted EBITDA. Our current synergy run rate is on pace to deliver more than four hundred million dollars. Midstream stable cash generation covers the company's dividend and our sustaining capital. We'll continue to capitalize on our integrated and diversified portfolio to deliver results.

Speaker 3: This is in addition to the previous authorization, which had approximately $3.1 billion remaining as of September 30th.

This is in addition to the previous authorization, which had approximately $3 $1 billion remaining as of September 30.

Speaker 3: Since 2012, the board has authorized $25 billion in cherry purchase.

Since 2012, the board has authorized 25 billion in share repurchases.

Speaker 3: These higher distributions to shareholders will be supported by $4 billion of mid-cycle adjusted EBITDA growth between 2022 and 2025. We are laser focused.

These higher distributions to shareholders will be supported by $4 billion of mid cycle adjusted EBITDA growth between 2022 and 2025.

We are laser focused on improving refining performance.

Speaker 3: Third quarter crew utilization of 95% was the highest utilization since 2019.

Third quarter crude utilization of 95% was the highest utilization since 2019.

Speaker 3: Arifining system ran above industry average utilization rates for the third straight quarter.

Our refining system ran above industry average utilization rates for the third straight quarter.

Mark Lazier: Moving to slide five. At our Investor Day in November 2022, we targeted three billion dollars in mid cycle EBITDA growth by 2025. This included NGL well hit the market, rodeo renewed business transformation and CP Kim growth project. Given the substantial progress employees across the company have made, we are raising the bar. We now expect to grow mid-cycle adjusted EBITDA by $4 billion between 2022 and 2025, reflecting a $1 billion increase from our original target.

Speaker 3: We continue to advance high return low capital projects to improve reliability and market cap.

We continue to advance high return low capital projects to improve reliability and market capture.

Speaker 3: We're executing 10 to 15 projects a year to improve market capture by 5%.

We're executing 10% to 15 projects at year to improve market capture by 5% <unk>.

Speaker 3: Last year we completed several projects that added 2% to market capture and we expected 2023 projects to add a further 1.3%.

Last year, we completed several projects that added 2% to market capture and we expect that 2023 projects to add a further one 3%.

Speaker 3: We reduce costs by $0.40 per barrel and will achieve a $0.75 per barrel run rate by the end of 2023.

We've reduced costs by 40 per barrel and we will achieve a 75 per barrel run rate by the end of 2023.

Speaker 3: Our people have fully embraced business transformation and we're raising our target to a $1 per barrel run rate by the end of 2024.

Our people have fully embraced business transformation and we are raising our target to a $1 per barrel run rate by the end of 2024.

Mark Lazier: This includes additional value from business transformation, midstream synergies, and commercial contributions. We are increasing the business transformation target to $1.4 billion from $1 billion. We are enhancing our commercial capabilities to extract additional value, maximizing return on capital employed, and increasing refining market capture.

Speaker 3: Slide 7 provides an overview of the business transformation program.

Slide seven provides an overview of the business transformation program.

Speaker 3: We're increasing our business transformation target to 1.4 billion dollars, comprised of 1.1 billion dollars of cost reductions and 300 million dollars of sustaining capital efficiency.

We're increasing our business transformation target to $1 4 billion.

Comprised of $1 1 billion of cost reductions and $300 million of sustaining capital efficiencies.

Speaker 3: The incremental reductions are $300 million in costs, over half of which benefits refining, and $100 million of sustaining capital. We're on track to achieve the targets this year and next.

The incremental reductions are $300 million in costs over half of which benefits refining and $100 million of sustaining capital.

Mark Lazier: We are committing to higher shareholder distributions. Our new target is $13 to $15 billion between July 2022 and year-end 2024. This is an increase from our original target of $10 to $12 billion. We will return over 50% of our operating cash flow to shareholders.

We are on track to achieve the targets this year and next.

Slide eight summarizes our strategic priorities and enhancements.

Speaker 3: Last November , we announced six priorities to increase shareholder value. These were ambitious and consistent with investor feedback.

Last November we announced six priorities to increase shareholder value these were ambitious and consistent with investor feedback.

Mark Lazier: Lastly, we plan to monetize assets that no longer meet strategic long-term objectives. Proceeds from monetizing these non-corathets are expected to be more than $3 billion. We'll deploy the proceeds to advance strategic priorities, including accelerating cash return to shareholders.

Speaker 3: Our achievements to date provide us with the confidence that we will not only meet these targets, but we'll exceed them. So with the support of our board, we're increasing our commitments to shareholders.

Our achievements to date provide us with the confidence that we will not only meet these targets, but will exceed them. So with the support of our board, we're increasing our commitments to shareholders.

Speaker 3: Delivering on the commitments will generate additional free cash flow from our integrated and diversified portfolio, positioning us to increase cash returns to shareholders now and in the future.

Delivering on the commitments will generate additional free cash flow from our integrated and diversified portfolio.

Mark Lazier: Slide 6 shows progress on distributions to shareholders and improving refining performance. We return $6.7 billion through sharey purchases and dividends since July 2022, representing over 50% of operating cash flow during the same time period. Strong cash generation and discipline capital allocation enabled us to exceed the pace to achieve the original $10 to $12 billion target before year-end 2024. The increased target of $13 to $15 billion equates to 25 to 30% of current market cash.

<unk> us to increase cash returns to shareholders now and in the future.

Speaker 3: Now, I'll turn the call over to Kevin to review the third quarter financial results.

Now I'll turn the call over to Kevin to review the third quarter financial results.

Thank you Mark.

Speaker 4: Adjusted earnings were $2.1 billion or $4.63 per share.

Adjusted earnings were $2 1 billion or.

A $4 63 per share.

Speaker 4: The $9 million decrease in the fair value of our investment in the Bonnex reduced earnings per share by two cents.

The $9 million decrease in the fair value of our investment in <unk> reduced earnings per share by <unk> <unk>.

Speaker 4: We generated operating cash flow of 2.7 billion dollars, including a working capital benefit of 285 million dollars, cash distributions from equity affiliates of 361 million dollars.

We generated operating cash flow of $2 7 billion.

Including a working capital benefit of $285 million.

Mark Lazier: Our Board of Directors approved a $5 billion increase to our sharey purchase authorization. This is in addition to the previous authorization, which had approximately $3.1 billion remaining as of September 30th. Since 2012, the Board has authorized $25 billion in sharey purchases. These higher distributions to shareholders will be supported by $4 billion of mid-cycle adjusted EBITDA growth between 2022 and 2025. We are a laser focused on improving refining performance. Third quarter crude utilization of 95% was the highest utilization since 2019.

Cash distributions from equity affiliates of $361 million.

Speaker 4: Capital spending for the quarter was $855 million.

Capital spending for the quarter was $855 million.

Speaker 4: We returned $1.2 billion to shareholders through $752 million of share repurchases and $465 million of dividends.

We returned $1 2 billion to shareholders through $752 million of share repurchases and $465 million of dividends.

Speaker 4: We ended the quarter with a net debt to capital ratio of 33%.

We ended the quarter with a net debt to capital ratio of 33%.

Speaker 4: annualized adjusted return on capital employed 17 percent.

Annualized adjusted return on capital employed was 17%.

I'll cover the segment results on slide 10.

Speaker 4: Additional details can be referenced in the appendix to this presentation.

Additional details can be referenced in the appendix to this presentation.

Speaker 4: This slide highlights the change in adjusted results by segment from the second quarter to the third quarter.

This slide highlights the change in adjusted results by segment from the second quarter to the third quarter.

Mark Lazier: Our refining system ran above industry average utilization rates for the third straight quarter. We continue to advance high return low capital projects to improve reliability and market capture. We're executing 10 to 15 projects a year to improve market capture by 5%. Last year, we completed several projects that added 2% to market capture, and we expected 2023 projects to add a further 1.3%. We reduced costs by $0.40 per barrel and will achieve a $0.75 per barrel run rate by the end of 2023.

Speaker 4: During the period, Adjusted Earnings increased $304 million mostly due to improved results in refining, partially offset by lower results in chemicals and midstream, as well as higher corporate costs.

During the period adjusted earnings increased $304 million.

Mostly due to improved results in refining partially offset by lower results in chemicals, and midstream as well as higher corporate costs.

Speaker 4: In midstream, third quarter adjusted pre-tax income was $569 million, down $57 million from the prior quarter.

And midstream third quarter adjusted pre tax income was $569 million down.

$957 million from the prior quarter.

Speaker 4: The decrease related to our NGL business and was mainly due to the timing of cargo freight costs as well as higher utility, integration and employee costs.

The decrease related to our NGL business and was mainly due to the timing of cargo freight costs as well as higher utility integration and employee costs. These.

Speaker 4: These impacts were partially offset by higher margins from increasing commodity.

These impacts were partially offset by higher margins from increasing commodity prices.

Mark Lazier: Our people have fully embraced business transformation, and we're raising our target to a $1 per barrel run rate by the end of 2024. Slide 7 provides an overview of the business transformation program. We're increasing our business transformation target to $1.4 billion, comprised of $1.1 The incremental reductions are $300 million in cost, over half of which benefits refining, and $100 million of sustaining capital. We're on track to achieve the targets this year and next.

Speaker 4: Chemicals-adjusted pre-tax income decreased $88 million to $104 million in the third quarter. This decrease was mainly due to lower margins. Global O&P utilization was

Chemicals, adjusted pre tax income decreased $88 million to $104 million in the third quarter.

This decrease was mainly due to lower margins.

Mobile <unk> utilization was 99%.

Refining third quarter adjusted pretax income was $1 7 billion.

Up $592 million from the second quarter.

Speaker 4: The increase was primarily due to higher realized margins and strong utilization.

The increase was primarily due to higher realized margins and strong utilization.

Speaker 4: Realized margins increased due to higher market crack spreads, partially offset by inventory hedge impacts, lower secondary product margins, and lower Gulf Coast clean product realization.

Realized margins increased due to higher market crack spreads, partially offset by inventory hedge impacts lower secondary product margins and lower Gulf coast clean product realizations.

Speaker 4: Inventory hedges and losses from secondary products mainly reflect the impact of rising crude prices during the quarter.

Inventory hedges and losses from secondary products, mainly reflect the impact of rising crude prices during the quarter.

Mark Lazier: Slide 8 summarizes our strategic priorities and enhancements. Last November, we announced six priorities to increase shareholder value. These are ambitious and consistent with investor feedback. Our achievements to date provide us with the confidence that we will not only meet these targets, but we'll exceed them. So, with the support of our board, we're increasing our commitments to shareholders. Delivering on the commitments will generate additional free cash flow from our integrated and diversified portfolio, positioning us to increase cash returns to shareholders now and in the future.

Speaker 4: These market factors negatively impacted capture rate, which was 66% in the quarter.

These market factors negatively impacted capture rates, which was 66% in the quarter.

Speaker 4: Marketing and Specialties adjusted third quarter pre-tax income was $633 million, a slight decrease of $11 million from the previous quarter, reflecting continued strong margins.

Marketing and specialties adjusted third quarter pretax income was $633 million a.

A slight decrease of $11 million from the previous quarter, reflecting continued strong margins.

Speaker 4: corporate and other segments adjusted pre-tax costs were $59 million higher than the previous quarter.

The corporate and other segments adjusted pre tax costs were $59 million higher than the previous quarter.

Speaker 4: The increase was mainly due to higher net interest expense related to acquiring DCP Midstream's public common units on June 15th, as well as employee related expenses. Our adjusted effective tax

The increase was mainly due to higher net interest expense related to acquiring DCP midstream public common units on June 15th as well as employee related expenses.

Mark Lazier: Now I'll turn the call over to review the third quarter financial results.

Our adjusted effective tax rate was 24%.

Kevin Mitchell: Thank you, Mark.

Kevin Mitchell: Adjusted earnings were $2.1 billion or $4.63 per share. The $9 million decrease in the fair value of our investment in the bond exchange reduced earnings per share by two cents. We generated operating cash flow of $2.7 billion, including a working capital benefit of $285 million and cash distributions from equity affiliates of $361 million. Capital spending for the quarter was $855 million. We returned $1.2 billion to shareholders through $752 million of sharey purchases and $465 million of dividends. We ended the quarter where they net debt to capital ratio of 33%.

Speaker 4: The impact of non-controlling interest was improved compared to the prior quarter and reflects a lower non-controlling interest since our acquisition of DCP midstream public common units. Slide 11 shows the change in cash during the third quarter.

The impact of non controlling interests was improved compared to the prior quarter and reflects a lower noncontrolling interests since our acquisition of DCP midstream public common units.

Slide 11 shows the change in cash during the third quarter.

We started the quarter with a $3 billion cash balance.

Speaker 4: Cash from operations was $2.4 billion, excluding working capital.

Cash from operations was $2 4 billion.

Excluding working capital.

During the quarter, we funded $358 million of pension plan contributions, which comes out of cash from operations.

Speaker 4: That was a working capital benefit of $285 million.

There was a working capital benefit of $285 million.

Speaker 4: Year-to-date working capital is a use of around $2 billion, primarily related to inventory, that we expect to mostly reverse by year-end.

Year to date working capital as a use of around $2 billion, primarily relates to inventory that we expect to mostly reverse by year end.

Kevin Mitchell: Analyze adjusted return on capital employed 17%.

Speaker 4: We received $280 million from asset dispositions, mainly reflecting the sale of our interest in Texas Gateway Tournament.

We received $280 million from asset dispositions, mainly reflecting the sale of our interest in South Texas Gateway terminal totaled.

Kevin Mitchell: I'll cover the segment results on slide 10.

Speaker 4: Total proceeds from asset dispositions are $370 million through the third quarter of 2022.

Kevin Mitchell: Additional details can be referenced in the appendix to this presentation. This slide highlights the change in adjusted results by segment from the second quarter to the third quarter. During the period adjusted earnings increased $304 million, mostly due to improved results in refining, partially offset by lower results in chemicals and midstream, as well as higher corporate costs. In midstream, third quarter adjusted pre-tax income was $569 million, down $57 million from the prior quarter.

Total proceeds from asset dispositions of $370 million through the third quarter of 2023.

Speaker 4: We funded $855 million of capital spend.

We funded $855 million of capital spending.

Speaker 4: This includes $260 million for the acquisition of a U.S. West Coast marketing

This includes $260 million for the acquisition of a U S West coast marketing business.

Speaker 4: we repaid approximately $500 million of debt, mostly reflecting lower borrowings on DCP Midstream's credit facility.

We repaid approximately $500 million of debt, mostly reflecting lower borrowings on DCP midstream has credit facilities.

Speaker 4: Additionally, we returned $1.2 billion to shareholders through share repurchases and dividends. Our ending cash balance was $3.2 billion.

Additionally, we returned $1 2 billion to shareholders through share repurchases and dividends.

Our ending cash balance was $3 5 billion.

Kevin Mitchell: The decrease related to our NGL business and was mainly due to the timing of cargo freight costs, as well as higher utility, integration, and employee costs. These impacts were partially offset by higher margins from increasing commodity prices. Chemicals adjusted pre-tax income decreased $88 million to $104 million in the third quarter. This decrease was mainly due to lower margins.

Speaker 4: This concludes my review of the financial and operating results. Next I'll cover a few eyes look either.

This concludes my review of the financial and operating results next I'll cover a few outlook items.

Speaker 4: In chemicals, we expect the fourth quarter global O&P utilization rate to be in the mid-90s.

In chemicals, we expect the fourth quarter global <unk> utilization rate to be in the mid nineties.

Speaker 4: In refining, we expect the fourth quarter worldwide crude utilization rate to be in the low 90s and turnaround expenses to be between 90 and $110 million.

In refining we expect the fourth quarter worldwide crude utilization rate to be in the low nineties and turnaround expenses to be between 90 and $110 million.

Kevin Mitchell: Republicans, Global O&P utilization was 99 percent.

Speaker 4: We anticipate fourth quarter corporate and other costs to come in between $280 and $300 million.

We anticipate fourth quarter corporate and other costs to come in between 280 and $300 million.

Kevin Mitchell: Refining third quarter adjusted pre-tax income of $1.7 billion, up $592 million from the second quarter. The increase was primarily due to higher realized margins and strong utilization. Realized margins increased due to higher market crack spreads, partially offset by inventory hedge impacts, lower secondary product margins, and lower Gulf Coast clean product realizations. Inventory hedges and losses from secondary products mainly reflect the impact of rising crude prices during the quarter. These market factors negatively impacted capture rate, which was 66 percent in the quarter.

Speaker 4: Now we will open the line for questions, after which Mark will make closing comments.

Now we will open the line for questions after which mark will make closing comments.

Okay.

Okay.

Yes.

Speaker 1: Thank you. We will now begin the question and answer session. As we open the call for questions, as a call to see the all participants, please aim at yourself to one question and the follow up. If you have a question, please press star, then one on your touch to the phone. If you wish to remove.

Thank you we will now begin the question and answer session.

We open the call for questions.

All participants please limit yourself to one question and the follow up.

Do you have a question. Please press Star then one on your Touchtone phone.

Thank you rich.

Yes.

Speaker 5: From the queue please press star then the number 2 key. If you're using a speakerphone you may need to pick up the handset first before pressing the numbers. Once again if you have a question please press star then 1 on your touchtone phone.

From Macquarie from Mchugh. Please press Star then the number.

Kevin Mitchell: Marketing and specialties adjusted third quarter pre-tax income was $633 million, a slight decrease of $11 million from the previous quarter, reflecting continued strong margins. The corporate and other segments adjusted pre-tax costs were $59 million higher than the previous quarter. The increase was mainly due to higher net interest expense related to acquiring DCP midstreams public common units on June 3rd 15th, as well as employee related expenses. Our adjusted effective tax rate was 24 percent. The impact of non-controlling interest was improved compared to the product quarter and reflects a lower non-controlling interest since our acquisition of DCP midstream public common units.

If youre using a squeak you may need.

That's question number.

Once again, if you have a question. Please press Star then one.

Our next question Brian.

Neil Mehta from Goldman Sachs.

Your line is now open please ask your question.

Speaker 6: Thank you. Good morning, team. This was very helpful, particularly the commentary on the strategic priorities. I want to, on the bullet about maintaining financial flexibility,

Thank you good morning team and this is very helpful, particularly the commentary on the strategic priorities and so I want to on the bullet about maintaining financial flexibility.

Speaker 6: The strength and flexibility you talk about moving from three to four billion dollars of EBITDA growth and greater than three billion dollars of non-core asset disposition. So I'm wondering if you could take some time to talk about what are the key drivers of the move from three to four billion dollars. And then as you identify non-core asset sales, what are some of the parameters that you're evaluating as we...

And flexibility you talk about.

Moving from $3 billion to $4 billion of EBITDA growth and greater than $3 billion of noncore asset dispositions.

Kevin Mitchell: Slide 11 chose the change in cash during the third quarter. We started the quarter with a $3 billion cash balance. Cash from operations was $2.4 billion excluding working capital. During the quarter we funded $358 million of pension plan contributions, which comes out of cash from operations. There was a working capital benefit of $285 million. Year-to-date working capital is a use of around $2 billion, primarily related to inventory, that we expect to mostly reverse by year end.

Wondering if you could take some time to talk about.

What are the key drivers of the move from $3 billion to $4 billion and then as you identify noncore asset sales what are some of the parameters that you're evaluating as we think about what assets could be part of that discussion.

Speaker 3: Hi Neil. Good morning. This is Mark. When you think about the additional billion dollar increments in EVDA, that really comes from the enhanced business transformation work that we're going to do, as well as the additional synergies we intend to capture from the DCP roll up, supplemented by the enhanced capability and value creation that we're going to see out of the commercial organization. Thank you.

Hi, Neil Good morning. This is mark when you think about the additional $1 billion increments and EBITDA that really comes from the enhanced business transformation work that we're going to do as well as the additional synergies we intend to capture from the DCP roll up.

Kevin Mitchell: We received $280 million from asset dispositions, mainly reflecting the sale of our interest in South Texas Gateway Terminal. Total proceeds from asset dispositions of $370 million through the third quarter of 2023. We funded $855 million of capital spending. This includes $260 million for the acquisition of a U.S. West Coast marketing business. We repayed approximately $500 million of debt, mostly reflecting lower borrowings on DCP midstream credit facilities. Additionally, we returned $1.2 billion to shareholders through sherry purchases and dividends.

Supplemented by the enhanced capability and in value creation that we're going to see out of the commercial organization.

Regarding asset dispositions.

Speaker 3: This fundamentally is about creating focus and redeploying capital. We're not gonna comment on specific assets today, but we generally have some high-performing assets that may be more valuable to others and may be more strategic to others, and we're going to explore that. And if we can capture value greater than our hold value, we'll do so. But the bottom line is this, that we're committed to managing the portfolio to drive focus that's consistent with our strategy and simplifying our business.

This fundamentally is about creating focus and redeploying capital we are not going to comment on specific assets today, but we generally have some high performing assets that may be more valuable to others, and maybe more strategic to others and we're going to explore that and if we can capture value greater than our hold value.

Kevin Mitchell: Our ending cash balance was $3.5 billion.

Kevin Mitchell: This concludes my review of the financial and operating results.

We will do so but the bottom line is this that we're committed to managing the portfolio to drive focus.

Kevin Mitchell: Next I'll cover a few outlook items. In chemicals, we expect the fourth quarter global O&P utilization rate to be in the mid-90s.

That's consistent with our strategy and simplifying our business.

Speaker 6: All right, thank you. And then on the quarter itself, the refining capture rates probably came in a little bit lower than street was expecting. Was that just timing effects with crude or is there anything else that we need to keep in mind as we think about what all means for 14?

Okay, Alright, Thank you and then on the quarter itself.

Kevin Mitchell: In refining, we expect the fourth quarter worldwide crude utilization rate to be in the low 90s and turnaround expenses to be between 90 and $110 million. We anticipate fourth quarter corporate and other costs to come in between $280 million and $300 million.

The refining capture rates, probably came in a little bit lower than street was expecting.

Was that just timing effects with crude or is there anything else that we need to keep in mind as we think about what it all means for <unk> in 2024.

Mark Lazier: Now we will open the line for questions after which Mark will make closing comments. Thank you.

Speaker 4: Yeah, Neil, it's Kevin. Let me just make a couple of comments on that. So we did have a.

Yes, Neil it's Kevin Let me just make a couple of comments on that so we did have a few things moving around in the quarter that impacted capture to the negative and so we saw.

Speaker 4: A few things moving around in the quarter that impacted capture to the negative. And so we saw regional price differentials.

Carla: We will now begin the question and answer session.

Regional price differentials that different from the benchmark that we use in terms of the market crack and so those worked against us.

Carla: As we open the call for questions, as the call to see to all participants, please aim at yourself to one question and the follow-up. If you have a question, please press star, then one on your touch time phone. If you wish to remove from the question from the queue, please press star, then the number to here. If you're using a speaker phone, you may need to pick up the hands that's left, call pressing the numbers. Once again, if you have a question, please press star, then one on your touch time phone.

Speaker 4: that differed from the benchmark that we use in terms of the market crack. And so those worked against us during the quarter, for example, the Chicago market, which became disconnected from the group and we moved product into that market. We also had an impact from the effect of inventory hedges in a rising price environment.

During the quarter for example, the Chicago, Chicago market, which became disconnected.

From the group and we move product into that market. We also had an impact from the effect of inventory hedges in a rising price environment. So that that component of this is all showed up in the central corridor. We expect the guide of $100 million to $150 million of that to come back in the fourth quarter as we see the physical.

Speaker 4: So that component, this is all showed up in the central corridor, we expect about $100 to $150 million of that to come back in the fourth quarter as we see the physical gain on those barrels that offsets the paper loss that we took in the third quarter.

Neil Mehta: Neil Mehta from Goldman Sachs. Your line is now open. Please ask your question. Thank you. Good morning, team. This was very helpful, particularly the commentary on the strategic priorities. I want to, on the bullet about maintaining financial strength and flexibility, talk about moving from three to four billion dollars of EBITDA growth and greater than three billion dollars of non-core asset disposition.

<unk> on those barrels that offsets the paper loss that we took in the third quarter.

That's really helpful. Thank you Ken.

Mark Lazier: So, I was wondering if you could take some time to talk about what are the key drivers of the move from three to four billion dollars, and then as you identify non-core asset sales, what are some of the parameters that you're evaluating as we think about what assets could be part of that discussion. Hi, Neil. Good morning. This is Mark. When you think about the additional billion dollar increments in EBITDA, that really comes from the enhanced business transformation work that we're going to do as well as the additional synergies.

Thank you now.

Speaker 1: Roger Reed from Wells Bargo Security. Please go ahead, the line is open.

Roger read from Wells Fargo Securities. Please go ahead your line is open.

Yes. Thank you good morning I appreciate the.

Speaker 7: out the changes here, improvements, I should say, overall. The question I have to start with, you mentioned $3 billion of target disposition proceeds, but you've upped your overall EBITDA target. So I'm just curious, what EBITDA is associated with those ops, if any, and what does that imply about the sort of extra growth and the overall performance of your raised EBITDA target?

Logged out the changes here.

Improvements I should say overall.

I have to start with you mentioned 3 billion targeted.

Disposition proceeds, but you've upped your overall EBITDA target. So I'm just curious what EBITDA is associated with those options, if any and what does that imply about the.

The sort of extra growth in the overall performance should be raised EBITDA target.

Speaker 4: Yeah, Roger, it's Kevin. So just for clarity on that point, the growth that we laid out there, the incremental billion.

Yes, Roger it's Kevin So just for clarity on that point the growth that we laid out there the incremental billion is excluding the impact of dispositions and so clearly dispositions will reduce EBITDA, we're not giving any guidance on that at this point in time I mean, you can come up with an assumption on where you where you may <unk>.

Speaker 4: is excluding the impact of dispositions. And so, clearly, dispositions will reduce EBITDA. We're not giving any guidance on that at this point in time. I mean, you can come up with an assumption on where you may think we'll be selling assets and make a multiple.

Mark Lazier: We intend to capture from the DCP roll-up supplemented by the enhanced capability and value creation that we're going to see out of the commercial organization. Regarding asset dispositions, this fundamentally is about creating focus and redeploying capital. We're not going to comment on specific assets today, but we generally have some high-performing assets that may be more valuable to others and maybe more strategic to others, and we're going to explore that, and if we can capture value greater than our whole value, we'll do so. But the bottom line is this that we're committed to managing the portfolio and drive focus that's consistent with our strategy and simplifying our business.

We will be selling assets and make a multiple.

Speaker 4: assumption from that, but we're not giving any specific guidance on the dispositions other than we expect to realize an excess of $3 billion.

Assumption from that but we're not giving any specific guidance on the dispositions other than we expect to realize in excess of $3 billion.

Neil Mehta: Okay. All right. Thank you.

Speaker 7: Okay, I assume based on the idea that there's always a larger pool of assets that could be sold. That's why it's unclear right now what the net impact would be. That's right. We'll do what?

Okay I assume based on the idea that there is always a larger pool of assets that could be sold not fly.

Clear right now what the net impact would be.

That's right we will do what makes the most sense for us.

Speaker 7: Okay, and then follow up to Neal's question on refining margins, but maybe looking forward rather than back. The shift here where diesel margins are well above gasoline, I think about generally a diesel yield improvement for you versus industry standards. Is that the right way to think about Q4 here? Or is there anything else that we should be paying attention to that will work against that?

Okay, and then a follow up to Neil's question on refining margins, but maybe looking forward rather than back.

Neil Mehta: Then on the quarter itself, the refining capture rate probably came in a little bit lower than street was expecting. Was that just timing effects with crude, or is there anything else that we need to keep in mind as we think about what all means for 4Q in 2024? Yeah, Neil, let's get on. Let me just make a couple of comments on that. We did have a few things moving around in the quarter that impacted capture to the negative, and so we saw regional price differentials that differ from the benchmark that we use in terms of the market crack.

They'll shift here, where diesel margins are well above gasoline I think about it yes.

Generally a diesel.

<unk> improvement for you versus industry standards is that the right way to think about Q4 here or is there anything else that we should be paying attention to that.

Work against that.

Speaker 5: Yeah, Roger, this is rich, you know, as we've indicated over over the years, our, our kid is shifted towards distillate production that there's nothing that's changed on that other than some of our flexibility to move back and forth between gasoline and just flip. So we still maintain a kit that is favorable to this margins in the market. Great, thank you.

Yes, Roger this is rich.

As we've indicated over over the years our kit is.

Shifted towards distillate production Theres, nothing thats changed on that other than some of our flexibility to move back and forth between gasoline and distillate.

We still maintain a kit.

Favorable for distillate.

Neil Mehta: And so those worked against us during the quarter, for example, the Chicago market, which became disconnected from the group, and we move product into that market. We also had an impact from the effect of inventory hedges in a rising price environment. So that component, this is all showed up in the central corridor. We expect to buy a hundred to a hundred and fifty million dollars of that to come back in the fourth quarter as we see the physical gain on those barrels that offsets the paper loss that we took in the third Or, that's really helpful. Thank you, Ken. Thank you now.

Margins in the market.

Great. Thank you.

Thank you Roger.

And ask it.

From UBS.

Your line is now open. Please go ahead.

Speaker 8: Good morning, guys. My question here is, and I know kind of answer, most likely you will not answer it, but we get this question a lot, a very strong result on the West Coast, again, a weaker default in price environment.

Good morning, guys.

Question here is and I know kind of funds that are most likely even harder, but we get this question a lot of very strong result on the west coast again.

A weaker diesel RIN price environment, instead of a possibility you could lead relative yield on a little longer and capture higher margins and then just wait for CFS to rebound later in 2024. So instead of Hey is there a possibility you could move the timing, let's talk about ROE deal to Baker coincide with Hyatt.

Speaker 8: Is there a possibility you could let rodeo run a little longer and capture higher margins and then just wait for LCFS to rebound later in 2024? So is there a possibility you could move the timing of start above rodeo to better coincide with higher LCFS prices and in the meantime make more money on the West Coast?

Roger Read: Roger Read, from Wells Fargo Security. Please go ahead. The line is open. Yeah, thank you. Good morning and appreciate the line out the changes here, improvements I should say overall. The question I have to start with, you mentioned three billion of target disposition proceeds, but you've upped your overall even dot target. So I'm just curious, what even does associated with those ops, if any, and what does that imply about the sort of extra growth in the overall performance of your raised dot target?

This crisis and in the meantime, make more money on the West coast.

Speaker 9: I'll start that answer and then maybe give a hand it over to Brian here to add a little color on the back side.

Manav.

I'll start that answer and then may be give a.

Hand, it over to Brian here to add a little color on the back side.

Speaker 9: So at Redale, maybe I'll just step back a little bit and then level set on everything that's going on at Redale here. So Redale, there was two NGOs that filed shooting against Contra Costa County, alleging that the Redale Renewed Project Environmental Impact Report insufficiently addressed project impact.

So <unk>, maybe I'll, just step back a little bit and level set on everything thats going on at Red day out here. So rodeo there was two Ngos that file suit and the comp against Contra Costa County, alleging that the rodeo renewed project environmental impact report and sufficiently addressed.

Roger Read: Yeah, Roger, it's Kevin. So just for clarity on that point, the growth that we laid out there, the incremental billion is excluding the impact of dispositions. And so clearly, dispositions will reduce EBITDA. We're not giving any guidance on that at this point in time. I mean, you can come up with an assumption on where you where you may think will be selling assets and make a multiple assumptions from that. But we're not giving any specific guidance on the dispositions other than we expect to realize an excess of three billion dollars.

<unk> impacts.

Speaker 9: The ruling for this suit was received earlier this year and actually there were several issues in our favor but there was three issues identified as insufficient in the county certified EIR.

The ruling for the suite was received earlier earlier this year and actually there were several issues in our favor, but there were three issues identified as insufficient in the county, and the county certified <unk>.

Speaker 9: The judge explicitly allowed construction to continue with the project while contra costate county works through and addresses the three deficiencies that were identified in the EIR.

The judge explicitly allowed construction to continue with the project, while Contra Costa County works through and addresses the three deficiencies that were identified in the IR.

Speaker 9: County actually posted that Revive VR update on October 24th.

The county actually posted that revised the IR update on October 24.

Roger Read: Okay, I assume based on the idea that there's always a larger pool of assets that could be sold. That's why it's unclear right now what the net impact would be. That's right. We'll do what makes the most sense for us. Okay, and then follow up to Neil's question on refining margins, but maybe looking forward rather than back, the shift here where diesel margins are well above gasoline. I think about, you know, generally a diesel yield improvement for you versus industry standards.

Speaker 9: That initiated a 45 day public comment period. The county will respond to the comments and then likely issue a final EIR early 20. The county will respond to the comments and then likely issue a final EIR early 20.

That initiated a 45 day public comment period, the county will respond to the comment and then likely issue a final.

Sure.

Early 2024.

Speaker 9: So right now our project construction remains on track complete in the first quarter and we're committed to that timeline. However, I wanna add, we have options.

So right now our project construction remains on track to complete in the first quarter and we're committed to that to that timeline.

However, I want to add we have options we.

Speaker 9: We've talked a little bit about this, but let me be a little bit more explicit on it.

You've talked a little bit about this but let me be a little bit more explicit on it on this one.

Speaker 9: There is flexibility to continue crude operation and the event that circumstances beyond our control prevent the start-up of the project. I want to say we are committed to the start-up of the project, but if for some reason we don't have that authority, we will continue to operate and crude operation.

There is flexibility to continue crude operation in the event that circumstances beyond our control prevent the startup of the project I want to say, we are committed to the startup of the project.

Roger Read: Is that the right way to think about Q4 here or is there anything else that we should be paying attention to that will work against that? Yeah, Roger, this is Rich. As we've indicated over the years, our kit is shifted towards distillate production. There's nothing that's changed on that other than some of our flexibility to move back and forth between gasoline and distillate. So we still maintain a kit that is favorable for distillate margins in the market. Great, thank you. Thank you, Roger.

If for some reason we don't have that authority, we will continue to operate in crude operation.

Speaker 9: This is a staggered conversion process. In the past, we've called this a ramp up plan. So that creates now.

This is a staggered conversion process in the past we've called this our ramp up plan.

So that creates natural flexibility for us.

Speaker 9: It allows us to continue process through, or it allows us to start up the Rodeo Renewed Project.

It allows us to continue to process crude or it allows us to startup the rodeo renewed project.

Speaker 9: which I want to remind people that's equivalent to removing the missions of a million cars from the road.

Which I want to remind people that's equivalent to removing the missions of 1 million cars from the roads.

Speaker 9: So we remain pretty confident. We remain confident, I should say, that we will start out the operations of Radeil or knew that at the end of the first quarter.

So we remain pretty confident we remain confident I should say that we will start off with the operations of our diode renewed at the end of the first quarter.

Manav Gupta: My name is Goodsha from UBS. Your line is now open. Please go ahead. Good morning, guys. My question here is, and I know kind of answer. Most likely you will not answer it, but we get this question a lot of very strong results on the West Coast again. A weaker D4 in price environment. Is there a possibility you could let rodeo run a little longer and capture higher margins and then just wait for LCFS to rebound later in 2024?

Speaker 9: and we're focused on executing that conversion plan. But we have this plan flexibility and we'll continue to process the crude oil if necessary.

And we're focused on executing that conversion plan.

We have this planned flexibility and will continue to process the crude oil if necessary.

Speaker 9: Now the outlook on the market and what you're the other party, your question is really this outlook of LCFS and in this relationship.

Now the outlook on the market and what your the other part of your question is really this outlook of <unk> and in this relationship.

Speaker 9: I'm going to hand that over to Brian who can explain that relationship a little bit more. It's more complicated than just the LCFS credit.

Hand that over to Brian who can explain that relationship a little bit more it's more complicated than just the CFS credit program.

Manav Gupta: So is there a way you could, is there a possibility you could move the timing of start-up of rodeo to better coincide with higher LCFS prices and in the meantime make more money on the West Coast. Manav, I'll start that answer and then maybe give a hand it over to Brian here to add a little color on the backside.

Speaker 10: Hi, I'm an obit's Brian . So when you think about the RD margin, you have to think about not just the credits, but the price of the feedstock, the price of the RD when it comes to market. So even though we've had lower LCFS and RINs, we've had these different prices that are outrun soybean prices, in fact soybean prices are off. We have more low CI feedstocks that are making their way into the US.

Manav, it's Brian So when you think about.

Rd margins you have to think about not just the credits, but the price of the feedstock price of their R&D. When it comes to market. So even though we've had lower CFS and wins, we've had deep distillate prices that have outrun soybean prices. In fact soybean prices are off we have more of a low ci feedstocks that are making their way into the U S.

Mark Lazier: So at Redale, maybe I'll just step back a little bit and then level set on everything that's going on at Redale here. So Redale, there was two NGOs that filed suit in the against contra cost accounting, alleging that the Redale Renewed Project Environmental Impact Report insufficiently addressed project impacts. The ruling for this suit was received earlier this year and actually there were several issues in our favor but there were three issues identified as insufficient in the county certified EIR.

Speaker 10: Kinder Morgan pipeline is allowing RD on their pipelines now, so that that means more reach of RD into the California market for consumption.

Linda Morgan pipeline is allowing our D.

Their pipelines now so that that means more reach of R&D into the California market for consumption.

Speaker 10: We've had a domestic demand is expected to continue to grow. We've converted all our stations. We're seeing RD demand in Oregon and Washington continue to mature as those programs mature. We've been seeing RD moving to states like Texas and Illinois in Colorado where they have tax abatement and tax reduction programs.

We've had domestic demand is expected to continue to grow we have converted all of our stations were seeing Rd demand in Oregon, and Washington continue to mature as those programs mature we have been seeing already moving to states like Texas, and Illinois, and Colorado, where they have tax abatement in tax reduction programs and I think traders bill.

Speaker 10: I think traders believe that the US harvest is looking good. And if you remember last year in Argentina, they had a drought. And this year we expect a more normal crop level condition.

Leave that to the U S. Harvest is looking good and if you remember last year in Argentina. They had a drought and this year, we expect a more normal crop level condition and then finally.

Mark Lazier: The judge explicitly allowed construction to continue with the project while contra cost accounting works through and addresses the three deficiencies that were identified in the EIR. The county actually posted that revised the EIR update on October 24th. That initiated a 45-day public comment period. The county will respond to the comment and then likely issue a final EIR early 2024. So right now, our project construction remains on track to complete in the first quarter and we're committed to that timeline.

Speaker 10: And then finally, you know, what a lot of traders and folks have on their minds is SAF Renewable Jet.

Lot of traders and our folks have on their minds as Saf were renewable jet and as those incentives make it make it make more sense to produce renewable jet youll see some of these R&D thats being produced move away and become SaaS. So we're expecting about 200000 barrels a day of R&D at the end of this year, but we will see some of that R&D.

Speaker 10: And as those incentives make it make it make more sense to produce renewable jet, you'll see some of this RID that's being produced move away and become SAF. So we're expecting about 200,000 barrels a day of RD at the end of this year, but I will see some of that RD in the future become renewable jet.

<unk> in the future become renewable jet.

Speaker 8: Thank you, that was very detailed and I think the key is the flexibility part which you expressed. My quick follow-up here is in your opening comments you said you are more than a refiner and yes you have a very strong marketing and specialty business. Can we have some visibility on the near and medium term how that business is looking both in Europe and in the US if you could elaborate a little bit on the near term outlook for that business. Thank you.

Thank you that was very detailed.

The key is the flexibility <unk> expense.

Mark Lazier: However, I want to add, we have options. We've talked a little bit about this but let me be a little bit more explicit on it on this one. There is flexibility to continue crude operation and the event that circumstances beyond our control prevent the startup of the project. I want to say we are committed to the startup of the project but if for some reason we don't have that authority, we will continue to operate and crude operation.

Quick follow up in your opening comments, you said you had more than a refiner and yes, we have a very strong marketing and speciality business.

Can we have some visibility on the near and medium term how that business is looking both in Europe and in the U S. If you could elaborate a little bit on the near term outlook for that business. Thank you.

Speaker 10: I'm going to have a sprain again. So I'll say we had a really strong quarter. This is the third quarter. In fact, it was our fourth best quarter on record. Q2 and Q3 are usually stronger, season-late, and Q1 and Q4.

Hey, Manav, it's Brian again, so I'll say, we had a really strong quarter in the third quarter. In fact, it was our fourth best quarter on record Q2, and Q3 are usually stronger seasonally than Q1 and Q4.

Mark Lazier: This is a staggered conversion process and the past we've called this a ramp-up plan. So that creates natural flexibility for us. It allows us to continue process crude or it allows us to start up the Radeo Renewed project which I want to remind people that's equivalent to removing the missions of a million cars from the roads. So we remain pretty confident, we remain confident, I should say, that we will start up the operations of Radeo Renewed at the end of the first quarter.

Speaker 10: And as you remember, starting 2019, we've added a lot of retail to our retail joint ventures in the US, we're up to 700 retail stores now, and they performed really well this quarter.

As you remember in starting 2019, we've added a lot of retail to our retail joint ventures in the U S were up to 700 retail stores now and they performed really well. This quarter. We're also focused on what we've D call. The last mile strategy internally, which is just getting rodeo complex R&D to the market directly to the market.

Speaker 10: We're also focused on what we've deep called the last mile strategy internally, which is getting rodeo complex RD to the market directly to the market and getting that value chain value at Philip 66. We've seen product volumes in our businesses relatively flat, but we continue to optimize those volume of volumes through a higher value distribution channels. So as a reminder, we have a wholesale business, we have a branded or franchise business, and then we have a retail business.

Getting that value chain value at Phillips 66, we've seen product volumes in our businesses relatively flat, but we continued to optimize those value of volumes through our higher value distribution channels. So as a reminder, we have a wholesale business. We have rebranded our franchise business and then we have a retail business and the branded a franchise.

Mark Lazier: And we're focused on executing that conversion plan but we have this plan flexibility and we'll continue to process the crude oil if necessary. Now the outlook on the market and what you're the other part of your question is really this outlook of LCFS and in this relationship. I'm going to hand that over to Brian who can explain that relationship a little bit more. It's more complicated than just the LCFS credit program.

Speaker 10: and the branded or franchise business and the retail business, those margins are significantly higher than the wholesale margins. And then finally on the Lupitin Space All Business, it continues to perform really well. So I'd say for Q4, we think that earnings will be in line with our normal Q4, a mid-cycle expectation.

Business in our retail business those margins are significantly higher than the wholesale margins.

Finally on the lubricants base oil business. It continues to perform really well. So I would say for Q4, we think that earnings will be in line with our normal Q4 at mid cycle expectations.

Speaker 3: Yeah, but now if I would just add over the top that Brian and his team have been just quietly and consistently executing their last mile strategy and this opportunity to invest in fairly small amount of capital to get very high returns into enhance our exposure to retail margins in a very creative way. And it's you're seeing the value show up and you're seeing a consistent performance there that we really appreciate.

Mark Lazier: I'm going to have the credit but the price of the beach stock, the price of the Radeo when it comes to market. So even though we've had lower LCFS and Rins, we've had these different prices that have outrun soybean prices and facts soybean prices are off. We have more low CI beach stocks that are making their way into the US. Kinder Morgan pipeline is allowing Radeo on their pipelines now so that that means more reach of Radeo into the California market for consumption.

Bob I would just add over the top that Brian and his team have been just quietly and consistently executing their last mile strategy in this this opportunity to invest.

Small amounts of capital to get very high returns and to enhance our exposure to retail margins.

Very creative way and it's you're seeing the value show up and Youre seeing a consistent performance there that we really appreciate it.

Yes.

Okay.

Thank you.

Yeah.

Okay.

Speaker 1: Thank you, Minas. Doug Legert from Bank of America. Please go ahead, your line is out.

Mark Lazier: We've had a domestic demand is expected to continue to grow. We've converted all our stations. We're seeing RD demand in Oregon and Washington continue to mature those programs mature. We've been seeing RD moving to states like Texas and Illinois in Colorado where they have tax abatement and tax reduction programs. I think traders believe that the US harvest is looking good and if you remember last year in Argentina, they had a drought in this year.

Thank you Manav, Doug Leggate from Bank of America. Please go ahead. Your line is open.

Speaker 4: And thanks so good morning everybody and appreciate all the updates this morning. Mark, I wonder if I could...

Thanks, Good morning, everybody and I appreciate all the updates this morning.

Mark I Wonder if I could.

Speaker 11: I'll try the disposal question again. I just want to be clear where you guys are in this process. Have you internally identified the assets for sale? I just wanted to be clear on that and maybe what your expectations are of timeline. I don't think that's been touched on and I've got a quick

Try the disposal question again I just wanted to be clear, where you guys are in this process have you internally identified.

The assets for sale I, just wanted to be Cleveland and maybe.

Mark Lazier: We expect a more normal crop level condition and then finally, you know what a lot of traders and folks have on their minds is SAF a renewable jet and as those incentives make it make it make more sense to produce a renewable jet. You'll see some of this RD that's being produced move away and become SAF. So we're expecting about 200,000 barrels a day of RD at the end of this year but I will see some of that RD in the future become a renewable jet.

What your expectations are of timeline I think that's been touched on and I've got a quick falloff from the signing.

Speaker 3: The answer to the first question is yes. The answer to the second question is, it really is a function of the market appetite. We understand the value that these assets provide us and they provide good value. So we've got to find willing buyers that have a greater affinity for those assets than we do. And so we're not in any rush, we're not performing any buyer sale, but we believe there's opportunities out there in the market today to execute that plan.

The answer to the first question is yes.

The answer to the second question is it really is a function of the market appetite.

I understand the value that these assets provide us and they provide good value. So we've got to find willing buyers that.

Have a greater affinity for those assets than we do and so we're not in any rush, we're not performing in a fire sale, but we believe there is opportunities out there in the market today.

Brian Mandell: Thank you. That was very detailed and I think the key is the flexibility part which you expressed. My quick follow-up here is in your opening comments, you said you are more than a refiner and yes, you have a very strong marketing and specialty business. Can we have some visibility on the near and medium term how that business is looking both in Europe and in the US if you could elaborate a little bit on the near term outlook for that business. Thank you.

To execute that plan.

Speaker 11: Thank you. My follow-ups on refaining and I'm gonna ask her a little forgiveness on this one at a time, but

Thank you my follow up's on refining and Im going to ask for a little forgiveness on this one at a time, but.

Speaker 11: I think you know where our position has been on the strength of the refining sector, the refining cycle going forward, volatile as it may be.

I think.

Our position has been on the strengths of the refining sector of the refining cycle going forward volatile as it may be.

Speaker 11: And we've kind of challenged you guys a few times on what you're assuming as the mid-cycle sustainable EBITDA for your business. So I'm curious if you could walk us through.

And we've kind of challenge you guys a few times on what you're assuming as the mid cycle sustainable EBITDA for your business. So I'm curious if you could walk us through.

Brian Mandell: I'm David Sprine again. So I'll say we had a really strong quarter. This is in the third quarter. In fact, it was our fourth best quarter on record Q2 and Q3 are usually stronger seasonally than Q1 and Q4. As you remember, starting 2019, we've added a lot of retail to our retail joint ventures in the US. We're up to 700 retail stores now and they performed really well this quarter. We're also focused on what we've deep called the last mile strategy internally which is getting rodeo complex RD to the market directly to the market and getting that value chain value at Phillips 66.

Speaker 11: You know, and the expeditions are always possible given that what on this call, what, what, what

And as expeditiously as possible given the coal what some.

Speaker 11: what the moving parts are behind the contribution of refining to the new mid-cycle targets? You know, the capture rate is one part, but you've been running ahead. When your facility's been running, you've been running ahead for quite a while now. And similarly, your utilization rates were not great. Now they're better. Is that a big factor? I'm just wondering what the key kind of moving parts are in the assumptions and what the contribution is from refining in your new targets. Thank you.

What the moving parts are behind the contribution of refining to the mid cycle targets.

<unk> is one part, but <unk> been running ahead when your facilities have been running you've been running ahead for quite a while now and similarly your utilization rates were not great either better is that a big factor I'm just wondering what the key kind of moving parts on your assumptions on what the contribution is from refining and your new targets. Thank you.

Brian Mandell: We've seen product volumes in our businesses relatively flat but we continue to optimize those volume volumes through a higher value distribution channels. So as a reminder, we have a wholesale business, we have a branded or franchise business and then we have a retail business and the branded or franchise business and a retail business, those margins are significantly higher than the wholesale margins. And then finally on the lubricant space oil business, it continues to perform really well.

Yes.

Speaker 4: Yeah, Doug, let me try and unpack some of that. So our mid-cycle, reminding EBITDA, as we laid out, is the best or day was $4 billion.

Yes, Doug let me.

Try and unpack some of that so our our mid cycle refining EBITDA as we laid out investor day was $4 billion.

Speaker 4: That reflects a historic average assumption around where the market will trade and that's

That reflects a <unk>.

Historic.

Average assumption around where the where the market will trade and that's consistent.

Brian Mandell: So I'd say for Q4, you know, we think that earnings will be in line with our normal Q4, a mid cycle expectations. Yeah, but now if I would just add on the top of Brian and his team event is quietly and consistently executing their last mile strategy in this this opportunity to invest a fairly small amount of capital to get very high returns into enhance our exposure to retail margins in a very creative way and it's you're seeing the value show up and you're seeing a consistent performance there that we really appreciate. Thank you.

Speaker 4: We haven't changed that assumption. What we are doing is increasing our ability to capture value across that system through lower costs and increased contribution from our commercial organization and the EBITDA they provide, that organization provides the system will predominantly show up in refining. It won't all be refining, but it'll predominantly show up.

We haven't changed that assumption.

What we are doing is increasing our ability to capture value across that system through lower costs and increased contribution from our commercial organization and the EBITDA uplift. They provide that organization provides to the system will.

We show up and refining it won't all be refining veiled predominantly show up in refining.

Speaker 4: We haven't tried to make a call on if we actually think the go forward mid cycle margin environment is stronger.

We haven't tried to make a call on if we actually think the go forward mid cycle margin environment is stronger now than it has been historically clearly we've been in above mid cycle conditions for most of this year and last year.

Doug Leggate: Thank you, Minas.

Speaker 4: Now then it has been historically clearly we've been in above mid cycle conditions.

Doug Leggate: Doug Lega from Bank of America, please go ahead. Your line is open. Thanks. Good morning everybody and appreciate all the updates this morning.

Speaker 4: for most of this year and last year. And that's all that we view that as upside. So we're still pretty optimistic for the near term. We're probably above mid-cycle in the near term, but our fundamental view of mid-cycle hasn't changed, but our belief in terms of what that business can do in a mid-cycle environment is going up with the enhancements we're putting in place. Kevin.

Doug Leggate: Mark, I wonder if I could try the disposal question again. I just want to be clear where you guys are in this process. Have you internally identified the assets for sale? I just wanted to be clear on that and maybe what your expectations are of timeline. I don't think that's been touched on and I'll put a clip full up on the signing.

And Thats all that we view that as upside so we're still pretty optimistic for the near term, we're probably above mid cycle in the near term with our fundamental view of mid cycle hasn't changed but our belief in terms of what that business can do in a mid cycle environment is going up with the enhancements we are putting in place.

Kevin has your utilization assumption changed.

Mark Lazier: The answer to the first question is yes. The answer to the second question is it's it's really is a function of the the market appetite. We understand the value that these assets provide us and they provide good value. So we've got to find willing buyers that have a greater affinity for those assets than we do. And so we're not in any rush. We're not performing any buyers sale but we believe there's opportunities out there in the market today to execute that plan.

Okay.

Doug Leggate: Thank you.

Speaker 4: Well, not really because if you think back to where we were running...

Well not really because if.

You think back to where we were running.

Speaker 4: for the years prior to the pandemic. And then we took a hit during the pandemic. We're really assuming we get back to that kind of level of operations that we were at before. And so some of the things, some of the refining performance priorities that Rich has talked about in the past that were outlined in investor day a year ago, we did not include those in as increases to mid-cycle. We viewed that as we have to deliver on these to get back to that level of operations that we historically be not.

For the years prior to the pandemic and then we took a hit during the pandemic, we're really assuming we get back to that kind of level of operations that we were at before and so some of the things some of the refining performance.

Priorities that rich has talked about in the past that were outlined in investor day, a year ago.

We did not include those in as increases to mid cycle, we viewed that as we have to deliver on needs to get back to that level of operations that we've historically been at.

Ryan Todd: My follow-ups on refining and I'm going to ask a little forgiveness of this one ahead of time but I think you know where our position has been on the strength of the refining sector or the refining cycle going forward volatile as it may be. And we've kind of challenged you guys a few times on what you're assuming as the mid-cycle sustainable EBITDA for your business. So I'm curious if you could walk us through you know and the expeditions are ways possible given that what I was called.

Terrific. Thank you very much.

Speaker 5: Thank you, Doug.

Okay.

Thank you Doug.

Ryan Todd from Piper Sandler.

Please go ahead your line is open.

Speaker 12: Thanks. Maybe if I could a question on the shareholder return target. Thanks for the positive update there. I mean, at the midpoint in implies.

Okay. Thanks.

Maybe if I could.

A question on the shareholder return target.

Ryan Todd: What what You know, what the moving parts are behind the contribution of refining to the human cycle targets. You know, the capture rate is one part, but you've been running ahead, when your episodes you've been running, you've been running ahead for quite a while now. And similarly, your utilization rates will not great. Now they're better. Is that a big factor? I'm just wondering what the key can move in parts of the assumptions and what the contribution is from refining in your new targets.

Thanks to the positive update there.

Midpoint and implies.

Speaker 12: I think roughly a billion dollars a year of buyback, a quarter to year end 2024, which is a nice step up from what we saw during the third quarter, pretty close to the pace that you've had in your today in 2023.

Roughly $1 billion a year of buyback.

Order through year end 2024.

Which is a nice step up from what we saw during the third quarter pretty close to the pace that you've had year to date in 2023.

Speaker 12: And what has been a like certainly above above mid cycle environment. So can you maybe talk about your confidence in, you know, what what what drove your confidence in being able to lean into the shareholder return target in that way? Maybe what it implies in in your view of the outlook from here and on the.

And what has been the.

Obviously, it's like certainly above above mid cycle environment. So can you maybe talk about your confidence in weather.

What drove your confidence in being able to lean into the shareholder return target in that way.

Mark Lazier: Thank you. Yeah, Doug, let me try and unpack some of that. So our mid cycle, reminding EBITDA, as we laid out, is best or day was four billion dollars. That reflects a historic average assumption around where the where the market will trade, and that's, we haven't changed that assumption. What we are doing is increasing our ability to capture value across that system through lower costs and increased contribution from our commercial organization, and the EBITDA they provide that organization provides the system will predominantly show up in refining.

Maybe what it implies in your view of the outlook from here and on the.

Speaker 12: You know, should we think you've been above pace on your prior mid cycle target has been above mid cycle. You know, should we think of it the same way? Or if we continue to stay above mid cycle in twenty twenty four.

Should we think you have been above pace on your prior mid cycle target of above mid cycle should we think of it the same way, where if we continue to stay above mid cycle in 2024.

Speaker 12: you know, that you'll drive towards the upside or beyond that type of target.

That you will drive towards the upside or beyond and that type of target.

Speaker 3: Yes, Ryan, this is Mark. Glad to answer that question. The answer to your last question answers yes. If we're outperforming our desire is to hit the high end of that target. And we've provided the flexibility in the event that there is less cash available because of market conditions. We can pull back a little bit.

Yes, Ryan this is mark glad to answer that question. The answer your last question. The answer is yes.

We're outperforming our our desire is to hit the high end of that target that we provided the flexibility.

In the event that.

There is less cash available because of market conditions that we can pull back a little bit.

Mark Lazier: It won't all be refining, but it'll predominantly show up in refining. We haven't tried to make a call on if we actually think that go forward mid cycle margin environment is stronger now than it has been historically. Clearly, we've been in above mid cycle conditions for most of this year and last year. And that's all that we view that as upside. So we're still pretty optimistic for the near term. We're probably above mid cycle in the near term, whether fundamental view of mid cycle hasn't changed, but our belief in terms of what that business can do in a mid cycle environment is going up with the enhancements we're putting in place.

Speaker 3: Another thing I would point out is our $3 billion in asset dispositions, we have not factored that cash into the $13 to $15 billion. So there's another.

Another thing I would I would point out is our $3 billion in asset dispositions, we have not factored that cash into the 13% to $15 billion. So there's another level of assurance. There that we can we can hit that and we really are focusing on the things that we can control as you look.

Speaker 3: level of assurance there that we can hit that. And we really are focusing on the things that we can control. As you look at the business transformation, we see those numbers, we see the reality of those numbers.

Look at the business transformation, we see those numbers, we see the reality of those numbers and we can capture that and use that value to drive those returns and we also see line of sight to the additional increments of EBITDA the $4 billion, that's coming into play and of course that that could be impacted by market as well.

Speaker 3: And we can capture that and use that value to drive those returns. And we also see line of sight to the additional increments of EBITDA, the $4 billion that's coming into play. And of course, that could be impacted by market as well. But when you factor all those things in, the risk of underperforming is fairly muted. So we've got a high level of confidence that we can deliver.

Well, but when you factor all of those things in the risk of underperforming is fairly muted. So we've got a high high level of confidence that we can deliver.

Kevin Mitchell: Kevin, has your utilization assumptions changed? Well, not really, because if you think back to where we were running for the years prior to the pandemic, and then we took a hit during the pandemic, we're really assuming we get back to that kind of level of operations that we were out before. And so some of the things some of the refining performance priorities that Rich has talked about in the past that we're outlined in investor day a year ago, we did not include those in as increases to mid cycle. We viewed that as we have to deliver on these to get back to that level of operations that we historically be not. That's right.

Kevin Mitchell: Thank you very much.

Speaker 12: Oh, great. Perfect. That's, uh, that's very helpful. And then maybe, um,

Okay perfect.

That's very helpful and then maybe.

Speaker 12: Just a question on the midstream. You've had a little bit of time now with a consolidated position there at DCP under your belt at this point. Synergies have moved a little bit higher from 300 to 400. May, can you talk about how you view the opportunity set there, both in terms of...

Just a question on the midstream you've had a little bit of time now with the.

With a consolidated.

Kevin Mitchell: Thank you, Doug.

Position there at DCP under your belt at this point synergies and moved a little bit higher from 300 to 400.

Can you talk about how you view the opportunity set there both in terms of.

Speaker 12: what you're seeing in terms of your ability to drive commercial improvements there and maybe incremental growth down the line.

What youre seeing in terms of your ability to drive commercial improvements, there and maybe incremental growth down the line.

Speaker 3: Yeah, sure. Ryan, this is Tim. So yeah, great question. Glad you asked. You know, it's like anything else, business transformation. And I'll talk about that because this is transformation. We started that process. And as we got into it, we just found more. We're doing the same thing with the.

Yeah sure Brian This is Tim.

So yes, great question glad you asked.

It's like anything else business transformation, and I'll talk about that because business transformation, we started that process and as we got into it we just found more.

Ryan Todd: Ryan, Lord, from Pope Sanla. Please go ahead. Your line is open. Good. Thanks. Maybe if I could a question on the shareholder return target. Thanks for the positive update there. I mean, at the mid point, it implies roughly a billion dollars a year of buyback a quarter to year end 2024, which is a nice step up from what we saw during the third quarter pretty close to the pace that you've had here today in 2023.

We're doing the same thing with the DCP integration. So as we brought this thing together and by the way we won't be complete with the integration will get all the stuff down by the end of the first quarter and I think it's important to say that because once that's done and the end of the first quarter. One we can get some redundancies and people that will move away and supporting two different systems. The.

Speaker 3: So as we brought this thing together, and by the way, we won't be complete with the integration, we'll get all the IT stuff done by the end of the first quarter. And I think it's important to say that because once that's done in the end of the first quarter, one, we can get some redundancies in people that will move away in supporting two different systems. The other is our commercial team and our ops team will all be reading off the same screens, the single source of data.

Other is our commercial team and our ops team will all be reading off the same screens. The single source of data. It will all be one versus trying to look at two different systems and trying to make some decisions. There. So we think the real catalyst for optimization is going to happen for further optimization will happen and that <unk>. The.

Ryan Todd: And what has been a, obviously, is like certainly above, above the cycle environment. So can you maybe talk about your confidence in, you know, what, what, what drove your confidence and being able to lean into the shareholder return target in that way. Maybe what it implies in your view of the outlet from here and on the, you know, should we think you've been above pace on your prior mid cycle target has been above mid cycle.

Speaker 3: It will all be one versus trying to look at two different systems and trying to make some decisions there. So we think the real catalyst for optimization is going to happen for further optimization will happen in that one queue.

Speaker 3: Probably worth me giving an example here on a commercial side. So we're really excited about what, you know, this venture.

Probably worth me, giving you. An example here on the commercial side. So we're really excited about what.

This venture.

Speaker 3: and putting it together. We're really excited about it. And we also think that as we've gotten into it, as I mentioned, we've really felt like we're finding more, more as we go. In example, I want to give you...

And putting it together really excited about it and we also think the as we've gotten into it as I mentioned.

We really felt like we're finding more and more as we go and the example, I'm going to give you as.

Ryan Todd: Well, you know, should we think of it the same way where we continue to stay above mid cycle on 2024, you know, that you'll drive towards the upside or beyond and that type of target. Yes, Ryan, this is Mark. The glad to answer that question. The answer your last question answers yes, if we're outperforming our desire is to hit the high end of that target, then we provided the flexibility in the event that there is less cash available because of market conditions.

Speaker 3: one that just came up a couple weeks ago for us, where commercially we were able to move barrels. I won't put any names in here. We were able to move barrels off one pipe, put it onto another pipe, and allow more volume to go on the pipe we moved off of, and that net impacts an additional $10 million a year.

It's one that just came up a couple of weeks ago for us. We're commercially we were able to move barrels I wont put any names and here, we are able to move barrels off one pipe put it onto another pipe.

And allow more volume to go on the pipe, we moved off of and that net impact an additional $10 million a year for us. So we could not have done that if we were two separate entities. So yes are we believers, yes, and do we think there is more there yes and are we encouraged once we get past the first quarter about there being more.

Speaker 3: So we could not have done that if we were two separate entities. So yeah, are we believers? Yes. And do we think there's more there? Yes. And are we encouraged once we get past the first quarter about there being more opportunity? Absolutely.

Ryan Todd: We can pull back a little bit. Another thing I would point out is our $3 billion asset disposition. We have not factored that cash into the $13 to $15 billion. So there's another level of assurance there that we can hit that. And we really are focusing on the things that we can control. As you look at the business transformation, we see those numbers. We see the reality of those numbers. And we can capture that and use that value to drive those returns.

More opportunity absolutely yes.

Speaker 3: Yeah, and I'd like to put another example out there, Ryan, that you last week, a group of us visited the Swinney Complex, and we got to stop by the control room that operates all of our fractionators. And I asked,

And I'd like to throw another example out there Ryan that lag.

A group of US visited the Sweeny complex and we've got to stop by the control room that operates all of our fractionator and I asked a couple of frontline operators, how they felt integration was going and they were they were expert because they see the ability to improve their ability to perform.

Speaker 3: A couple of frontline operators, how they felt integration was going, and they were ecstatic because they see the ability to improve their ability to perform.

Speaker 3: They see it in real time. They said we can run at harder rates because we get better information. There's greater collaboration. They can run without concern of surprises coming at them. And so the whole mindset around business transformation, synergy capture, being more competitive has evolved all the way to the front line. These folks want to win and they want to figure out every day how to do better and how to drive more synergies and capture that deliver value. So it's, it's real and it's out on the front line.

They see it in real time, they said, we can run it harder rates, because we get better information Theres greater collaboration they can run without concern of surprises coming at them and so.

Ryan Todd: And we also see line of sight to the additional increments of EBITDA. The $4 billion that's coming into play. And of course that that could be impacted by market as well. But when you factor all the things in, the risk of underperforming is fairly muted. So we've got a high level of confidence that we can deliver. Great. Perfect. That's that's very helpful.

The whole mindset around business transformation synergy capture being more competitive has evolved all the way to the frontline. These these folks want to win and they want to figure out everyday had to do better and how to drive more synergies and capture that deliver value. So it's real and it's out on the front lines.

Tim Roberts: And then maybe just a question on the mystery. And you've had a little bit of time now with with the consolidated position there DCP under your belt. This point synergies and moved a little bit higher from 300 to 400.

Alright, thank you.

Speaker 13: Thank you Ryan. Who chang from Scotia Bank? Please go ahead, your line is open. Thank you. Good morning guys.

Thank you Ryan.

<unk> from Scotia Bank. Please go ahead your line is open.

Tim Roberts: Let me talk about how you view the opportunity set there both in terms of what you're seeing in terms of your ability to drive commercial improvements there and maybe incremental growth down the line. Yeah, sure. I'm Ryan. This is Tim. So yeah, great question. Glad to ask. You know, it's like anything else business transformation. And I'll talk about that because this is transformation. We started that process. And as we got into it, we just found more.

Thank you.

Morning, guys.

Okay.

One of <unk> questions.

Speaker 13: Good morning. A couple of questions.

Good morning, a couple.

Couple of questions.

Marketing.

Speaker 13: and the business seems to continue to do better than expected in a number of quarters. You've been adding retail stations and everything. So should we look at that? Your baseline, what you consider a mid-cycle, have a structural improvement because of the way that how you guys are maybe changing the way how you're running or adding to the assets?

The business seems to continue to do better than expected.

In both quarters.

Add thing Vita station and everything.

So if we looked at that Youll pay instantly what concede that suddenly coal.

Tim Roberts: We're doing the same thing with the DCP integration. So as we brought this thing together. And by the way, we won't be complete with the integration. We'll get all the IT stuff down by the end of the first quarter. And I think it's important to say that because once that's done in the end of the first quarter, one we can get some redundancies in people that will move away in supporting two different systems.

Have a structural improvement because.

The way that how you guys are maybe.

Maybe changing the way how you run your ethane to the asset.

Speaker 13: And if this is the case, what is the new good baseline that we can assume?

Tim Roberts: The other is our commercial team and our ops team will all be reading off the same screens the single source of data. It will all be one versus trying to look at two different systems and trying to make some decisions there. So we think the real catalyst for optimization is going to happen for further optimization will happen in that one queue.

And if that's the case what is the.

New good base might that we tend to assume.

Speaker 3: Yeah, Paul, what I think you're asking is, you know, you're applauding the good performance you've seen in the marketing group, and it continues to increase as Brian and his team execute their strategy. And you're asking, is there a reset in the mid-cycle performance of the marketing business? Is that the question? That's correct.

Yeah, Paul I think you are asking is.

Youre applauding the good performance you've seen in the marketing group and it continues to increase as Brian and his team execute their strategy and you are asking is is there a reset in the mid cycle performance of the marketing business is that is that the question that's correct.

Speaker 13: That's correct. Because I mean, that I think historically that you thought of like, oh, this cycle is 400 minutes and a quarter.

Tim Roberts: Probably worth me giving an example here on a commercial side. So we're really excited about what this venture and putting it together. We're really excited about it. And we also think the, you know, as we've gotten into it. As I mentioned, we've really felt like we're finding more and more as we go. An example I want to give you is one that just came up a couple weeks ago for us where commercially we were able to move barrels.

Correct.

I think historically that you had sort of like Oh.

Next cycle against 400 mid quarter.

Speaker 13: but you certainly have done much better than that in the past two years. I think that one quarter you can say, oh, maybe it's the wine ripper, but it seems like it's pretty consistent that you guys have been performing better. I'm just curious, is it structurally that the business is stronger today as you add more retail stations and everything, or is it truly that you think it's just the market condition is much better than average?

But certainly that has done much better than that in the past two years.

I think that one quarter, you can say or maybe the one linked but.

Tim Roberts: I won't put any names in here. We were able to move barrels off one pipe. I put it on to another pipe and allow more volume to go on the pipe we moved off of and that net impacts an additional $10 million a year, for us. So we could not have done that if we were two separate entities. So yeah, are we believers? Yes. And do we think there's more there? Yes. And are we encouraged? Once we get past the first quarter about there being more opportunity? Absolutely. Yeah.

It seems like you are pretty consistent that you guys been performing better just curious that if it structurally that the business is stronger today as you add more.

<unk> retail station and everything.

Is it truly that you think yes.

It's just the.

Lots of conditions better much better than the average.

Speaker 10: I would call this a grind. I would say we did raise the mid cycle a couple of years ago and we'll continue to watch it. And if we need to raise it again, and we will, but obviously the business is performing better and we're proud of the business performing better. We're gonna continue to look for opportunities to add to the last mile strategies and some of our other initiatives. So as we see that value hitting the bottom line, we'll indeed at some point raise the mid cycle.

Yes, Paul This is Brian I would say, we did raise the mid cycle a couple of years ago, and we'll continue to watch it and if we need to raise it again, we will but obviously the business is performing better and.

And we're proud of the business performing better we're going to continue to look for opportunities to add to the last mile strategy in some of our other initiatives. So as we see that value hitting the bottom line will indeed at some point Reyes mid cycle.

Tim Roberts: And I'd like to put another example out there, Ryan, that you lastly, a group of us visited the swimming complex and we got to stop by the control room that operates all of our fractionators. And I asked a couple of frontline operators how they felt integration was going. And they were excited because they see the ability to improve their ability to perform. They see it in real time. They said, we can run at harder rates because we get better information.

Speaker 13: So, Brian , that you don't feel comfortable that we have seen enough of the improvement saying that the mid-cycle is that in data is now even better than what you had in my a couple years ago.

So.

Brian that you don't feel.

Comfort the boat that we have seen enough of the improvement, saying that mid cycle is that you can beat that is now given better than what you had in mind a couple of years ago.

Tim Roberts: There's greater collaboration. They can run without concern of surprises coming at them. And so the whole mindset around business transformation, synergy, capture, being more competitive has evolved all the way to the frontline. These folks, folks want to win and they want to figure out every day how to do better and how to drive more synergies and capture that deliver value. So it's, it's real and it's out on the frontline.

Speaker 13: I'd say keep watching the bottom line and you'll see the dollars there. And when we feel comfortable, we'll move the mid cycle up. Yeah, Brian never likes confidence. Okay. And that maybe one is for rich, which

I'd say keep watching the bottomline and Youll see that Youll see the dollars there and when we feel comfortable we'll move to mid cycle, yes, Brian never lacks confidence.

Ryan Todd: Okay. Thank you. Thank you, Ryan.

[laughter] okay.

<unk>.

And that maybe this one is for which which.

Speaker 14: Can you share with us that what fill up 66 turn around activity look like for next year? You said comparing to this year, whether it's going to be higher, lower or about the same. And also what's your view about the industry turn around activity for next year. Thank you.

Can you share with us.

Phillips 66.

Kind of run that typically look like for next year, yes at some point that this is going to be.

Lower or about the same and also whats your view about the industry coming along.

Paul Cheng: Paul Cheng from Scotia Bank. Please go ahead. Your line is open. Thank you. Good morning, guys. Good morning, Paul. Good morning. A couple of questions. Marketing. The business seems like continue to do better than expected in a number of quarters. You've been acting with the station and everything. So should we look at that?

Thank you.

Speaker 9: Yeah Paul, I appreciate the question. We generally give that guidance out fourth quarter. And so stand by for that outlook on the fourth quarter.

Yes, Paul I. Appreciate the question, we generally give that guidance out fourth quarter.

Brian Mandell: You're basically what consider needs to like to have a structure improvement because of your the way that how you guys are maybe changing the way how you want it or adding to the asset. And if you take the case, what is the new good basement that we can assume? Yeah, Paul, what I think you're asking is, you know, you're, you're applauding the good performance you've seen in the marketing group and it continues to increase as Brian and his team execute their strategy and you're asking if is there a reset in the min cycle performance of the marketing business.

And so standby for that outlook on the fourth quarter.

Speaker 1: Thank you Paul. John Royal from J.P. Morgan, please go ahead, your line is open.

Thank you Paul.

John Royall from Jpmorgan. Please go ahead your line is open.

Speaker 15: Hi, good afternoon. Thanks for taking my question. So my first question is on the net debt target you had guided to hitting the top end of your range on leverage by year end. It's a pretty modest tailwind from working capital and 3Q. And Kevin mentioned you'll catch it up.

Hi, good afternoon, Thanks for taking my question.

So my first question is on the net debt target you had guided to hitting the top end of your range on leverage by year end.

Pretty modest tailwind from working capital in <unk>, and Kevin mentioned Youll catch it up and get most of that one each build back in <unk>.

Speaker 15: get most of that one H build back in 4Q. Do you need any help from price to hit that working capital number or could price conversely be a headwind that prevents you from getting it all back and then does the worsening environment that we've seen here in 4Q in refining potential impact your ability to hit that target?

Do you need any help from price to hit that working capital number or could price Conversely be a headwind.

Vince you from getting it all back and then does the worsening environment that we've seen here in <unk>.

Refining potentially impact your ability to hit that target.

Speaker 4: Yeah, I mean, John , the marked environment will impact profitability, or impact cash generation, but the bulk of the working capital benefit we expect to see in the fourth quarter will be driven by inventory impacts. And that's pretty solid in terms of that impact. While there will always be other parts moving around in this equation.

Yeah.

John the market environment will impact profitability, it will impact cash generation.

Brian Mandell: Is that the question? That's correct. That's correct because I mean that I think historically that is all of my own cycle is 400 minutes and quarter. But you certainly that has done much better than that in the past two years. I think that one quarter you can say, oh, maybe it's the one with, but it seems like it's really consistent that you've been performing better. I just curious that if it's structurally that the business is stronger today.

But the bulk of the working capital benefit we expect to see in the fourth quarter will be driven by inventory impacts.

Pretty solid in terms of that impact so while there will always be other parts moving around in this equation.

Speaker 4: I feel pretty confident that the top end of that targeted range will be around about there at the end of the year. I'm not too concerned by that.

I feel pretty confident that the top end of that targeted range is.

We'll be around about there at the end of the year I am not too concerned by that.

Brian Mandell: As you add more we test station and everything or what that is is truly that you think it's just the market condition is better much better than average. Paul, this is right. I would say we did raise the mid cycle a couple of years ago and we'll continue to watch it and if we need to raise it again and we will, but obviously the business is performing better and we're proud of the business performing better.

Speaker 15: Okay, great, thank you. And then I was just hoping for your latest views on WCS differentials. You should get some tailwind from the widening we've seen here in 4Q. But where do you think the differential goes from here? Particularly as we get close to the startup of TMX, although there's some debate over the timing there, but just any thoughts on WCS as we head into next year would be helpful.

Okay, great. Thank you and then I was just.

Hoping for your latest views on WCS differentials.

You should get some tailwind from from the widening we've seen here in <unk>.

But where do you think the differential goes from here, particularly as we.

We get closer to the startup of Tms, Although there is some debate over the timing there, but just any thoughts on WCS as we head into next year would be helpful.

Brian Mandell: We're going to continue to look for opportunities to add to the last mile strategy and some of other initiatives. So as we see that value hitting the bottom line will indeed at some point. We're going to increase the mid cycle. So, Brian, that you don't feel comfortable that we have seen enough of the improvement, saying that the mid-cycle is that indeed that is now even better than what you had in mind a couple of years ago. I'd say keep watching the bottom line and you'll see the dollars there and when we feel comfortable we'll move the mid-cycle up.

Speaker 10: Hey John , this is Brian . So, like you said, the WCS dips are very wide, minus $25. Now, that's a benefit to us. We're the largest importer of Canadian crude, nearly 500,000 barrels a day.

Hey, John its Brian So like you said that the WCS steps are very wide minus $25 now that's that's a benefit to us where we are the largest importer of Canadian crude.

Nearly 500000 barrels a day.

Speaker 10: The reason the reason the Ditz RY is because you have more production than you have pipeline egress and you also have the dilly wind blended into starting in September into the crude, which adds or swells volume.

The reason that the reason that <unk> is because you have more production than you have pipeline egress and you also have the diluent blended into starting in September into the crude which adds or <unk> volume.

Speaker 10: We would expect to see the depth remain seasonally wide with more barrels than egress as traders also sell barrels to meet year-end inventories.

We would expect to see the depth remained seasonally wide with more barrels and egress as traders also sell barrels to meet our year end inventories <unk> has announced the startup in April.

Rich Harbison: Yeah, Brian never likes confidence, okay, saying that and that maybe this one is for Rich, which can you share with us that what Philip 66 turn around and typically look like for next year, you said, comparing to this year whether it's going to be higher, lower or about the same and also what's your view about the industry turning around activity for next year. Thank you. Yeah, Paul, I appreciate the question.

Speaker 10: TMX has announced the startup in April , you know.

Speaker 10: We'll take them at their word currently. We don't think the pipeline will run at full capacity, but if you take a look at the forward curves currently, Q2, Q3 average is about minus $15, and that's about where we think it might end up.

We'll take them at their word currently we don't think the pipeline will run at full capacity, but if you take a look at the forward curves. Currently Q2 Q3 average is about minus $15 and Thats about where we think it might it might end up.

Thank you.

Thank you John.

Speaker 1: Jason Gableman from Curlin and Company. Please go ahead, your line is open. Hey guys, thanks.

Jason gave women from Cowen and company. Please go ahead your line is open.

Rich Harbison: We generally give that guidance out fourth quarter and so stand by for that outlook on the fourth quarter. Thank you, Paul.

Hey, guys. Thanks for taking my questions.

Speaker 16: The first one's on refining capture and we've seen co-product headwinds continue now for a second quarter. Last quarter was a pretty high headwind and then this quarter was even higher and the oil price moving up obviously impacts the co-product headwind but was wondering what else is going on in that bucket if you could give us some visibility into that and if you take any of that a structural in nature.

The first one's on refining capture and we've seen co product headwinds continuing now for our second quarter last quarter was a was a pretty high headwind and then this quarter was even higher.

John Royall: John Royle from JP Morgan, please go ahead, the line is open. Good afternoon, thanks for taking my question. So my first question is on the net debt target. You had guided to hitting the top end of your range on leverage by your end. It was a pretty modest tailwind from working capital in 3Q and Kevin mentioned you'll catch it up and get most of that one H build back in 4Q. Do you need any help from price to hit that working capital number or could price conversely be a headwind that prevents you from getting it all back?

And the oil price moving up obviously impacts the co product headwind, but was wondering what else is going on in that bucket.

If you could give us some visibility into that and if you take any of that is structural in nature.

Jason This is rich are you asking about the co product bucket.

Kevin Mitchell: And then does the worsening environment that we've seen here in 4Q in refining potential we impact your ability to hit that target? Yeah, I mean, John, the marked environment will impact profitability or impact cash generation. But the bulk of the working capital benefit we expect to see in the fourth quarter will be driven by inventory impacts and that's pretty solid in terms of that impact. So while there will always be other parts moving around in this equation, I feel pretty confident that the top end of that targeted range is will be around about there at the end of the year. I'm not too concerned about that.

Speaker 9: Yeah, secondary products. Yeah. Yeah. So the primary and refining that primary mover there is petroleum coke, right? That's the product that generally drives that secondary product margin for us. And it generally lags behind crew pricing, right? And it's tied to the coal markets that can pressure it up or pressure it down based on.

Yes secondary products secondary products yeah. So.

So the primary and refining that primary mover there is petroleum coke right thats the product that that generally drives that secondary product margins for us and it generally lags behind crude pricing right.

John Royall: Okay, great. Thank you.

And it's tied to the coal markets.

Can pressure at upper pressure down based on.

Speaker 9: supply and demand requirements there. The other the other subtle component that plays into secondary products force is NGL pricing.

Supply and demand requirements there.

The other subtle component that plays into secondary products force as NGL pricing.

Speaker 9: And that's, it's bigger in some markets than others for us, but it certainly does play into it. And that's been depressed for, for some period now. And that's, you know, our outlook continues to.

And that's it's bigger in some markets than others for us, but it certainly does play into it and thats been depressed or for some period now.

Our outlook continues to.

Brian Mandell: And then I was just hoping for your latest views on WCS differentials. You should get some tailwind from the widening we've seen here in 4Q. But where do you think the differential goes from here, particularly as we get close to the startup of TMX, although there's some debate over the timing there.

Speaker 9: not be real strong on NGL pricing on the forward curve.

Not be real strong on NGL pricing on the forward curves.

Speaker 9: There's a balance of the secondary products, which are fuel oil, intermediates, and some other products that probably aren't worth mentioning. Those have been relatively flat, really, over the period. So we don't see, so we see those Coke and NGLs as the primary movers right now for some.

The balance of the secondary products, which are fuel oil intermediates and some other products that probably aren't worth mentioning those have been relatively flat over the over the period. So.

We don't see so we see those those coke in Ngls as the primary movers right now for us in that area.

Brian Mandell: But just any thoughts on WCS as we head into next year will be helpful. Hey, John, it's Brian. So, like you said, the WCS dips are a very wide minus $25. Now that's a benefit to us. We're the largest import of Canadian crude, cleanly 500,000 barrels a day. The reason the reason the dips are wide is because you have more production than you have pipeline egress. And you also have the deal you went blended into starting in September into the crude, which adds or swells volume.

Speaker 16: Got it. Thanks. And my follow-up is on the $3 billion divestment target and not really where that's going to come from, but use of proceeds. You mentioned in the earnings press release that those proceeds will be deployed to strategic priorities, including returns to shareholders, but I was wondering if there's a desire to use some of that cash to continue to grow and just kind of in broad stroke,

Got it thanks, and my follow up is on the $3 billion divestment target and not really where that's going to come from but use of proceeds you mentioned in the earnings press release that.

Those proceeds will be deployed to strategic priorities, including returns to shareholders, but I was wondering if.

There is a desire to use some of that cash.

To grow and just.

Brian Mandell: We would expect to see the dips remain seasonally wide with more barrels than egress. It's traders also sell barrels to meet year end inventories. TMX has announced the startup in April. You know, we'll take them at their word currently. We don't think the pipeline will run at full capacity. But if you take a look at the forward curves currently Q2, Q3 average is about minus $15. And that's about where we think it might might end up.

Kind of in broad strokes, what type of growth you would prioritize thanks, yes.

Speaker 16: what type of growth you would prioritize. Thanks.

Speaker 3: Yes, thanks Jason. The the cash that we might receive from those asset dispositions will be will be allocated consistent with our

Yes, thanks, Jason.

The cash that we might receive from those asset dispositions will be will be allocated consistent with our.

Speaker 3: a premise capital allocation process that always includes a growth element. And if there are things that we can accelerate in our growth.

Our premise capital allocation process that always includes a growth element.

There are things that we can accelerate our growth.

Speaker 3: Agenda we can look at that, but certainly also would be a factor is opportunities around our balance sheet and and then opportunities to hit the high end of our cash return to shareholders target. So it's all in play just like any dollar of cash that we would that we would turn over to Treasury

Agenda, we can look at that but certainly also would be a factor as opportunities around our balance sheet.

John Royall: Thank you. Thank you, John.

And.

Net opportunities to hit the high end of our cash return to shareholders target. So it's all in play dislike any dollar of cash that we would that we would turn it over to treasury.

Jason Gabelman: Jason Gabelman from current company. Please go ahead. Your line is open.

Jason Gabelman: Hey, guys. Thanks for taking my questions. The first one's on refining capture and we've seen co-product headwinds continue now for a second quarter. Last quarter was a pretty high headwind and then this quarter was was even higher and the oil price moving up obviously impacts the co-product headwind, but was wondering what else is going on in that bucket if you could give us some visibility into that and if you think any of that is structural in nature.

Got it thanks for the color.

You bet.

Speaker 1: Thank you Jason, Matthew Blair from Tudor Pickering Hope. Your line is now open.

Thank you, Jason Matthew Blair from Tudor Pickering Holt.

Your line is now open. Please go ahead.

Speaker 17: Hey, good morning. Thanks for taking my questions. First one is on the chem side. Could you talk about some of the dynamics in PE?

Hey, good morning, Thanks for taking my questions first one.

Kevin could you talk about some of the dynamics in the P/e.

Speaker 17: to clean up a little bit here, but what's your margin out looked? We'll see what's in the international ID and Q4. I think we'll see.

Okay.

Cleaned up a little bit here, but what's your margin outlook.

And international heading into Q4.

Thank you.

Jason Gabelman: Jason, this is Richard. You're asking about the co-product bucket? Yes, secondary products. Yeah, so the primary and refining that primary mover there is petroleum coke. That's the product that generally drives that secondary product margin for us and it generally lags behind crew pricing and it's tied to the coal markets that can pressure and offer pressure down based on supply and demand requirements there. The other subtle component that plays into secondary products for us is NGL pricing and that's bigger in some markets than others for us, but it certainly does play into it and that's been depressed for for some period now and that's, you know, our outlook continues to not be real strong on NGL pricing on the forward curves.

Jason Gabelman: The balance of the secondary products which are fuel oil intermediates and some other products that probably aren't worth mentioning. Those have been relatively flat really over the over the period, so we don't see those coke and NGLs, the primary movers right now force in that area.

Okay.

Okay great.

Okay.

What's driving that.

Okay.

Speaker 1: Hi Matthew, unfortunately your line is breaking up, so we'll have to move to the next question. If you'd like to rejoin the queue, potentially try dialling back in.

Hi, Matthew Unfortunately, your line is breaking up they will have to move to the next question.

You'd like to re join the queue and Troy Donny back Ed.

Speaker 3: Yeah, we heard the first part. So Tim's gonna take a shot at the first part around PE margins and inventories. Yeah, yeah. Let me do that. Sorry, Mavivdi, with the break out there. I got the front end of it. And so I could take a while, guess on the back end, but that probably wouldn't go well.

Yes, we heard the first part and so Tim is going to take a shot at the first part around P/e margins and inventories.

Let me, let me do that and sorry, Matthew D with the breakout there I got the front end of it and so I could take a wild guess on the backend, but that probably wouldn't go well.

Speaker 3: So from a chem standpoint, look, it feels like a little bit of a broken record.

From a <unk> standpoint look it feels like a little bit of a broken record.

Speaker 3: We still have a supply-demand imbalance. Clearly China, Asia is not where we'd like it to be. Over time, we expect that to come back around, but you're gonna have to see correction and the new capacity that's coming on board, coupled with demand picking up. So we do think that's gonna be hard to see, at least through 2024, but to your point, I mean, when you have things like we've seen a little bit of improvement on polyethylene, seeing a couple price increases, which would think good.

Still have a supply demand imbalance clearly China Asia is not where we'd like it to be over time, we expect that to come back around but youre going to have to see correction in the new capacity, that's coming on board coupled with demand picking up. So we do think that's going to be hard to see at least through 2024.

But to your point I mean, when you have things like we've seen a little bit of improvement on polyethylene seen a couple of price increases which has been good.

Speaker 3: I don't know if they're sustainable, but nonetheless, they've come through, which has helped.

Don't know if they are sustainable, but nonetheless, they've come through which has helped.

Speaker 3: And we have seen, you know, we're inventors coming off slowly, but coming off.

And we have seen inventories coming off slowly but coming off.

Jason Gabelman: Got it, thanks. My follow-up is on the $3 billion divestment target and not really where that's going to come from, but use of proceeds you mentioned in the earnings fresh release that those proceeds will be deployed to strategic priorities, including returns to shareholders, but I was wondering if there's a desire to use some of that cash to continue to grow and just kind of in broad strokes what type of growth you would prioritize.

Speaker 18: So from that standpoint, there's a little bit of, I'm gonna say constructive, but we know that balance has got to get fixed.

So from that standpoint, there is a little bit on let's say constructive, but we know that balance has got to get fixed now. The one thing that I think is really important we stress here is that <unk>.

Speaker 18: Now the one thing that I think is really important, we stress here is though that CPECAMS, KIT, and their assets, 96% of their assets are utilizing advantage-featured-

<unk> kit and their assets, 96% of their assets are utilizing advantaged feedstocks. So while there may be a lot of pain in the chemical space. Those they are leveraging advantaged feedstocks are doing okay.

Speaker 18: So while there may be a lot of pain in the chemical space, those that are leveraging advantage feedstocks are doing okay. We'd love to be doing a lot better, but they're doing okay. Our assets at CP-CAM are running hard, as well as probably other, their competition using light feed in the US Gulf Coast and in the Middle East. But those that are using NAPFA in higher cost regions are probably challenged at this point.

Jason Gabelman: Thanks. Yeah, thanks Jason. The cash that we might receive from those asset dispositions will be allocated consistent with our premise capital allocation process that always includes a growth element and if there are things that we can accelerate in our growth agenda we can look at that, but certainly also would be a factor is opportunities around our balance sheet and then opportunities to hit the high end of our cash return to shareholders target. So it's all in play just like any dollar of cash that we would that we would turn over to Treasurer. Andrew.

Jason Gabelman: Got it. Thanks for the color. You bet.

We'd love to be doing a lot better, but they're doing okay. Our assets at <unk> are running hard as well as probably other competition using light feet in the U S Gulf coast and in the Middle East, but those that are using naphtha in higher cost regions are probably challenged at this point our teams are running hard running well taking advantage in our way.

Matthew Blair: Thank you, Jason.

<unk> positioned to actually benefit from this low margin environment because of the feedstock. We're in so with that we still think though there is some more lift than to do with regard to getting the supply demand balance where it needs to be but if we can continue to see some green shoots like the GDP.

We saw earlier this week, maybe put a couple of those together we can start moving that forward.

Thank you.

Speaker 1: Jo Leitch from Morgan Stanley . Please go ahead, your line is open.

Jay Li from Morgan Stanley. Please go ahead your line is open.

Matthew Blair: Matthew Blair from Tudor Pickering Hope. Your line is now open. Please go ahead. Hey, good morning. Thanks for taking my questions. First one is on the chem side. Could you talk about some of the dynamics and PE? The inputs have cleaned up a little bit here, but what's your margin outlook? Hi, Matthew. Unfortunately, your line is breaking up, so we'll have to move to the next question.

Hey team thanks for taking my questions.

I wanted to just start on the demand side. So recognizing the <unk> demand data has been very volatile could you just share what you're seeing in your system across gasoline diesel and jet.

And then if possible just your outlook for the remainder of the year realizing base, it's really volatile right now thank.

Speaker 10: Hey, Joe, this is Brian . Let me take a stab at that. In the US, inventories remain low for disclets, 17% under five-year averages. gasoline has come back up now closer to five-year averages. So maybe starting on the disclet side, cracks are now in the mid to high $20 range. We're in adjusted in US Gulf Coast, New York, and Europe .

Hey, Joe This is Brian let me take a stab at that.

In the U S inventories remained low for distillate, 17% under five year averages gasoline has come back up now close to five year averages. So maybe starting on the distillate side cracks are now in the mid to high 20 $20 range when adjusted U S Gulf Coast, New York and in Europe.

Matthew Blair: And if you'd like to rejoin the queue, potentially try dialing back in. Yeah, we heard the first part.

Speaker 10: You know, to be reminded, European refineries need distillate cracks at certain higher levels because of the higher net gas price to incentivize production. We're seeing a distillate demand globally at about 2% higher than last year. In the U.S., we're starting to receive demand a little bit off, although we've been watching the manufacturing sector, and we think it's probably bottom truck tonnage index has begun to rebound as an example.

All right.

Be reminded European refiners need distillate cracks at higher levels because of the higher net gas price to incentivize production, we're seeing distillate demand globally at about 2% higher than last year in the U S, where we see demand a little bit off although we will be watching the manufacturing sector and we think it's probably bought.

Tim Roberts: So Tim's going to take a shot at the first part around PE margins and inventories. Yeah, let me do that. Sorry, Matthew, the break out there. I got the front end of it. And so I could take a while, guess on the back end, but that probably wouldn't go well. So from a chem standpoint, look, it feels like a little bit of a broken record. We still have a supply demanding balance clearly trying to Asia's not where we'd like it to be over time.

<unk> truck tonnage index has begun to rebound as an example, so for on our outlook for diesel we'd say, it's supported from here with the low inventories and potential shortages in Europe kind of as a reminder, this is Europe's first year without Russian distillate supplies. So we'll have to watch that as well.

Speaker 10: So for on our outlook for diesel, we'd say it's supported from here with the low inventory and potential shortages in Europe . And as a reminder, this is Europe's first year without Russian disillusioned supplies. So we'll have to watch that as well.

Tim Roberts: We expect that to come back around, but you're going to have to see correction and the new capacity that's coming on board, coupled with demand picking up. So we do think that's going to be hard to see, at least through 2024, but to your point, I mean, when you have things like we've seen a little bit of improvement on polyethylene, seeing a couple price increases, which have been good. I don't know if they're sustainable, but nonetheless, they've come through, which is helped.

Speaker 10: And on the gas, gas cracks, you know, gas has been coming along for a ride as refineries have produced, continue to produce diesel with the strong diesel margins.

And on the gas gas cracks.

Gas has been coming along for ride as refiners have produced continue to produce a diesel with the strong diesel margins.

Speaker 10: We've also had a butane blending startup, which has increased the volume of gasoline and the summer has kind of been devoid of any hurricane issues, but we have seen this, especially on the Gulf Coast. We started to see plans cutting units. So we think that will be a health clearing up.

We've also had a butane blending startup which is increased.

Gasoline and a summer has kind of been devoid of any hurricane issues, but we have seen especially on the Gulf coast, we starting to see plans cutting FCC units. So we think that will be a help to clearing up.

Tim Roberts: And we have seen, you know, we're inventories coming off slowly, but coming off. So from that standpoint, there's a little bit of, I'm going to say constructive, but we know that balance has got to get fixed.

Speaker 10: Gasoline on the demand side we're seeing global gasoline 2% over

Tim Roberts: Now, the one thing that I think is really important we stress here is, though, that city comes, kit and their assets. 96% of their assets are utilizing advantage feed stocks. So while there may be a lot of pain in the chemical space, those that are leveraging advantage feed stocks are doing okay. We'd love to be doing a lot better, but they're doing okay. Our assets at GP camp are running hard, as well as probably other competition using light feed in the US Gulf Coast and in the Middle East.

Gasoline on the demand side, we're seeing global gasoline, 2% over year over year, and particularly strong Asia and Middle East Europe about flat U S demand seems to be about flat to Latin America has been really strong about 5% over last year. So on the on our outlook for gasoline.

Speaker 10: year over year in particularly strong Asian Middle East. Europe about flat, US demand seems to be about flat too. Latin America has been really strong about 5% over last year.

Speaker 10: So on the on our outlook for a gasoline, let's say command relatively flat through the end of the year, as the markets work to clean up some of the gasoline supply.

Demand relatively flat through the end of the year as the markets work to clean up some of the gasoline supply.

Speaker 19: Got it, thanks. Appreciate your response on that. And I just wanted to ask on the dividend. So it was good to see the increase in the target. We touched on the buyback a bit. Because you saw my answer, you're thinking on dividend growth from here.

Got it. Thanks I appreciate your response on that.

Tim Roberts: But those that are using naphtha in higher cost regions are probably challenged at this point. Our teams are running hard, running well, taking advantage and are well positioned to actually benefit from this low margin environment because of the feed stock we're in. So with that, we still think though there's some more lifting to do with regard to getting the supply demand balance where it needs to be.

Just wanted to ask on the.

The dividend so we.

It's good to see the increase in the payout target we touched on the buyback, but could you just remind us how youre thinking.

On dividend growth from here.

Speaker 3: Yeah, our position there is consistent. The secure growing dividend, we've grown the dividend every year since spin, and that's not going to change. Yeah.

Yes, our position there is consistent.

Secure growing dividend.

We've grown the dividend every year since since spin.

Tim Roberts: But if we can continue to see some green shoots like the GDP that we saw earlier this week, maybe you put a couple of those together and we can start moving that forward. Thank you.

And that's not going to change.

Great. Thanks appreciate it today.

You bet.

Speaker 1: Thank you, James. This concludes the question and answer session. I will now turn the call over to Mark Leisure for closing comments.

Thank you Jay This concludes the question and answer session I will now turn the call over to Martin <unk> for closing comments.

Joe: Very late from Morgan Stanley. Please go ahead. Your line is open. 18, thanks for taking our questions. So I wanted to just start on the demand side. So recognizing the Deere demanded has been really volatile. Could you share what you're seeing in your system across gasoline, diesel, and jet? And then it's possible just your outlook for the remainder of the year, realizing that it's really volatile right now. Thank you.

Okay.

Speaker 3: Thank you. And thanks to all of you for your questions.

Thank you.

Thanks to all of you for your questions.

Speaker 3: Our integrated and diversified portfolio continues to perform extremely well and creates unique competitive advantage.

Our integrated and diversified portfolio continues to perform extremely well and it creates unique competitive advantage.

Speaker 3: Our strong performance and confidence and execution drives us to increase several of our original commitments in our pursuit to achieve superior returns for our shareholder.

Our strong performance and confidence in execution drives us to increased several of our original commitments and our pursuit to achieve superior returns for our shareholders.

Brian Mandell: Hey, Joe, this is Brian. Let me take a stab at that. In the US, inventories remain low for distillate, 17% under five year averages. Gasoline has come back up now close to five year averages. So maybe starting on the distillate side, cracks are now in the mid to high $20 range. We're in adjusted in US Gulf Coast, New York, and Europe. You know, to be reminded, European refineries need distillate cracks at certain higher levels because of the higher net gas price to incentivize production.

Speaker 3: We will return $13 to $15 billion to shareholders by year 2024.

We will return $13 billion to $15 billion to shareholders by year end 2024.

Speaker 3: Will reduce refining operating costs by a dollar per barrel.

We will reduce refining operating cost by $1 per barrel.

Speaker 3: will capture over 400 million dollars in midstream synergies and will deliver 1.4 billion dollars of cash savings by year-end 2024.

We'll capture over $400 million in midstream synergies.

And we will deliver $1 4 billion of cash savings by year end 2024.

Speaker 3: We'll monetize over $3 billion of non-corathets and we'll enhance our commercial capabilities in generating additional earnings.

We will monetize over $3 billion of noncore assets.

And we will enhance our commercial capabilities generating additional earnings.

Brian Mandell: We're seeing a distillate demand globally at about two percent higher than last year. In the US, we're starting to receive demand a little bit off, although we've been watching the manufacturing sector, and we think it's probably bottom truck tonnage index has begun to rebound as an example. So for on our outlook for diesel, we'd say it's supported from here with the low inventories and potential shortages in Europe. And as a reminder, this is Europe's first year without Russian distillate supply.

Our plans are ambitious.

Speaker 3: We're raising the bar and continuing to reward shareholders now and well into the future.

We're raising the bar and continuing to reward shareholders now and well into the future.

Speaker 2: Thanks Mark. If you have any additional questions, please call over or me. We appreciate your participation on the call today. Thank you.

Thanks Mark.

Do you have any additional questions. Please call. Our main we appreciate your participation on the call today. Thank you.

Brian Mandell: So we'll have to watch that as well. And on the gas cracks, you know, gas has been coming along for a ride as refineries have produced, continue to produce diesel with the strong diesel margins. We've also had a few tank blending start-up, which has increased the volume of gasoline and the summer has kind of been devoid of any hurricane issues. But we have seen this, especially on the Gulf Coast, we started to see plans cutting FCC units.

Speaker 20: So.

[music].

Brian Mandell: So we think that will be a help to clear up the gas lane. On the demand side, we're seeing global gasoline, 2 percent over a year over a year, in particularly strong Asia and Middle East, Europe about flat. US demand seems to be about flat too. Latin America has been really strong, about 5 percent over last year. So on the on our outlook for gasoline, we can say, demand relatively flat through the end of the year, as the market has worked to clean up some of the gasoline supply. Got it. Thanks. Appreciate your response on that.

James: I just wanted to ask on the dividend. So it was good to see the increase in the power that we touched on the buyback a bit, because you saw minus how you're thinking on dividend growth from here. Yeah, our position there is consistent. The secure growing dividend. We've grown the dividend every year since spin, and that's not going to change. Great. Thanks. Appreciate it today. You bet. Thank you, James.

Carla: This concludes the question and answer session.

Mark Lazier: I will now turn the call over to Mark Leisure for closing comments. Thank you. And thanks to all of you for your questions. Our integrated and diversified portfolio continues to perform extremely well, and it creates unique competitive advantage. Our strong performance and confidence and execution drives us to increase several of our original commitments in our pursuit to achieve superior returns for our shareholder. Brothers. We will return $13 to $15 billion to shareholders by year in 2024.

Mark Lazier: We'll reduce refining operating costs by a dollar per barrel. We'll capture over $400 million in midstream synergies and we'll deliver $1.4 billion of cash savings by year and 2024. We'll monetize over $3 billion of non-core assets and we'll enhance our commercial capabilities generating additional earnings.

Mark Lazier: Our plans are ambitious. We're raising the bar and continuing to reward shareholders now and well into the future. Thanks Mark. If you have any additional questions please call over or me.

Carla: We appreciate your participation on the call today. Thank you.