Phillips 66 Q4 2025 Phillips 66 Earnings Call | AllMind AI Earnings | AllMind AI
Q4 2025 Phillips 66 Earnings Call
Check for today's call.
At this time, all participants are in less than 90 mode later, we will conduct a question and answer session. Please note that this conference is being recorded.
And I'll turn the call over to Sean Maher. Vice president of investor relations and chief economist.
Sean, you may begin.
Hello and welcome to the Philips. 66 fourth quarter earnings conference call. Participants on today's call will include mark laser chairman and CEO, Kevin Mitchell, CFO. Don, Baldridge, Midstream and chemicals, Rich Harbison refining and Brian Mandell marketing and Commercial.
Today's presentation can be found on the investor relations section of the Philips 66 website, along with supplemental financial and operating information
Slide 2 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. With that, I'll turn the call over to mark.
Thank you, Sean.
Welcome everyone to our fourth quarter earnings call.
We delivered strong financial and operating results reflecting our continued focus on world-class operations.
Our discipline approach to improving refining. Performance has delivered High utilization rates, record, clean product, yields and enhanced flexibility.
In Midstream, we achieved another quarter of record, NGL transportation, and fractionation volumes driven by our Coastal Bend and dose Picos 2. Expansions
more importantly, our team remains focused on continuous Improvement.
We're lowering our cost structure and increasing reliability, so that we can maximize profitability in any Market environment.
Moving to slide 4, safe, reliable operations, coupled with discipline investment, generates compelling shareholder returns.
Safety is foundational.
I'm pleased to report that 2025 was our best year ever for safety performance. I'm very proud of our employees for their commitment to safety.
Speaker #1: Our approach to improving refining performance has delivered high utilization rates, record clean product yields, and enhanced flexibility. In Midstream, we achieved another quarter of record NGL transportation and fractionation volumes, driven by our Coastal Bend and Dos Picos 2 expansions.
Mark Lashier: Approach to improving refining performance has delivered high utilization rates, record clean product yields, and enhanced flexibility. At midstream, we achieved another quarter of record NGL transportation and fractionation volumes driven by our Coastal Bend and Dos Picos 2 expansions. More importantly, our team remains focused on continuous improvement. We're lowering our cost structure and increasing reliability so that we can maximize profitability in any market environment. Moving to slide 4, safe, reliable operations coupled with disciplined investment generates compelling shareholder returns. Safety is foundational. I'm pleased to report that 2025 was our best year ever for safety performance. I'm very proud of our employees for their commitment to safety. I would like to congratulate them on a job well done. In 2025, we optimized our portfolio through multiple strategic actions.
Mark Lashier: Approach to improving refining performance has delivered high utilization rates, record clean product yields, and enhanced flexibility. At midstream, we achieved another quarter of record NGL transportation and fractionation volumes driven by our Coastal Bend and Dos Picos 2 expansions. More importantly, our team remains focused on continuous improvement. We're lowering our cost structure and increasing reliability so that we can maximize profitability in any market environment. Moving to slide 4, safe, reliable operations coupled with disciplined investment generates compelling shareholder returns. Safety is foundational. I'm pleased to report that 2025 was our best year ever for safety performance. I'm very proud of our employees for their commitment to safety. I would like to congratulate them on a job well done. In 2025, we optimized our portfolio through multiple strategic actions.
I would like to congratulate them on a job. Well done.
In 2025, we optimized our portfolio through multiple strategic actions.
Speaker #1: More importantly, our team remains focused on continuous improvement. We're lowering our cost structure and increasing reliability so that we can maximize profitability in any market environment.
We acquired the remaining 50% interest. In the WRB joint, venture sold a 65% interest in the Germany and Austria retail marketing business and idled the Los Angeles refinery.
We also improved our competitive position in Midstream with the acquisition of Coastal Bend and expansion of dose Picos 2.
Speaker #1: Moving to slide four, safe, reliable operations coupled with disciplined investment generates compelling shareholder returns. Safety is foundational. I'm pleased to report that 2025 was our best year ever for safety performance.
The strong operating results are reflection of a concerted multi-year plan and were not done yet.
In refining, we're targeting adjusted controllable costs per barrel to be approximately $5.50 on an annual basis by the end of 2027.
Speaker #1: I'm very proud of our employees for their commitment to safety. I would like to congratulate them on a job well done. In 2025, we optimized our portfolio through multiple strategic actions.
We've also streamlined our business to focus on the areas where we have a competitive advantage.
Speaker #1: We acquired the remaining 50% interest in the WRB joint venture, sold a 65% interest in the Germany and Austria retail marketing business, and idled the Los Angeles refinery.
Mark Lashier: We acquired the remaining 50% interest in the WRB joint venture, sold a 65% interest in the Germany and Austria retail marketing business, and idled the Los Angeles refinery. We also improved our competitive position at midstream with the acquisition of Coastal Bend and expansion of Dos Picos II. The strong operating results are a reflection of a concerted multi-year plan, and we're not done yet. In refining, we're targeting adjusted controllable cost per barrel to be approximately $5.50 on an annual basis by the end of 2027. We've also streamlined our business to focus on the areas where we have a competitive advantage. As an example, our acquisition of the remaining 50% interest in WRB increased our exposure to Canadian heavy crude differentials by 40%. These differentials have widened by approximately $4 a barrel since the announcement of the acquisition.
Mark Lashier: We acquired the remaining 50% interest in the WRB joint venture, sold a 65% interest in the Germany and Austria retail marketing business, and idled the Los Angeles refinery. We also improved our competitive position at midstream with the acquisition of Coastal Bend and expansion of Dos Picos II. The strong operating results are a reflection of a concerted multi-year plan, and we're not done yet. In refining, we're targeting adjusted controllable cost per barrel to be approximately $5.50 on an annual basis by the end of 2027. We've also streamlined our business to focus on the areas where we have a competitive advantage. As an example, our acquisition of the remaining 50% interest in WRB increased our exposure to Canadian heavy crude differentials by 40%. These differentials have widened by approximately $4 a barrel since the announcement of the acquisition.
as an example, our acquisition of the remaining 50% interest in WRB, increased our exposure, to Canadian heavy crude differentials by 40%
these differentials have widened by approximately 4 dollars a barrel since the announcement of the acquisition.
Speaker #1: We also improved our competitive position in midstream with the acquisition of coastal bend and expansion of Dos Picos 2. The strong operating results are a reflection of a concerted, multi-year plan, and we're not done yet.
Philip 66 assets are well positioned to capture opportunities in markets across the value chain.
Combining operating Excellence, our integrated portfolio, and our disciplined Capital. Allocation mindset will continue to deliver shareholder returns across commodity Cycles.
Speaker #1: In refining, we're targeting adjusted controllable cost per barrel to be approximately $5.50 on an annual basis by the end of 2027. We've also streamlined our business to focus on the areas where we have a competitive advantage.
Last quarter, Rich discussed the progress and future of refining.
This quarter Dawn will share more about our plans in midstream.
Thanks Mark.
Speaker #1: As an example, our acquisition of the remaining 50% interest in WRB increased our exposure to Canadian heavy crude differentials by 40%. These differentials have widened by approximately $4 a barrel since the announcement of the acquisition.
In Midstream, we've built an asset base that offers flexibility and reliability for our customers.
We've increased adjusted ibaa by 40% since 2022. And we've delivered approximately, 1 billion dollars of adjusted ibaa in the fourth quarter of 2025.
Speaker #1: Phillips 66 assets are well positioned to capture opportunities in markets across the value chain. Combining operating excellence, our integrated portfolio, and our disciplined capital allocation mindset, we'll continue to deliver shareholder returns across commodity cycles.
Mark Lashier: Phillips 66 assets are well positioned to capture opportunities in markets across the value chain. Combining operating excellence, our integrated portfolio, and our disciplined capital allocation mindset will continue to deliver shareholder returns across commodity cycles. Last quarter, Rich discussed the progress and future of refining. This quarter, Don will share more about our plans in midstream.
Mark Lashier: Phillips 66 assets are well positioned to capture opportunities in markets across the value chain. Combining operating excellence, our integrated portfolio, and our disciplined capital allocation mindset will continue to deliver shareholder returns across commodity cycles. Last quarter, Rich discussed the progress and future of refining. This quarter, Don will share more about our plans in midstream.
Our growth and our performance is a result of disciplined execution, which is created a competitive Wellhead to market value chain.
Over the past 4 years, we have high-graded and simplified our portfolio. We bought in psxp and DCP and we expanded The Sweeney hub.
Speaker #1: Last quarter, Rich discussed the progress and future of refining. This quarter, Don will share more about our plans in
Speaker #1: midstream. Thanks,
Additionally our recent Pinnacle and Coastal bin. Acquisitions are performing above expectations, both operationally and financially.
Rich Harbison: Thanks, Mark. In midstream, we've built an asset base that offers flexibility and reliability for our customers. We've increased adjusted EBITDA by 40% since 2022, and we've delivered approximately $1 billion of adjusted EBITDA in Q4 2025. Our growth and our performance is a result of disciplined execution, which has created a competitive well-head-to-market value chain. Over the past four years, we have high-graded and simplified our portfolio. We bought in PSXP and DCP, and we expanded the Sweeny Hub. Additionally, our recent Pinnacle and Coastal Bend acquisitions are performing above expectations, both operationally and financially, improving our acquisition multiple by about a half a turn. We intend to deliver increasing returns, improved customer service, and enhanced reliability. Moving to slide 6.
Donald J. Baldridge: Thanks, Mark. In midstream, we've built an asset base that offers flexibility and reliability for our customers. We've increased adjusted EBITDA by 40% since 2022, and we've delivered approximately $1 billion of adjusted EBITDA in Q4 2025. Our growth and our performance is a result of disciplined execution, which has created a competitive well-head-to-market value chain. Over the past four years, we have high-graded and simplified our portfolio. We bought in PSXP and DCP, and we expanded the Sweeny Hub. Additionally, our recent Pinnacle and Coastal Bend acquisitions are performing above expectations, both operationally and financially, improving our acquisition multiple by about a half a turn. We intend to deliver increasing returns, improved customer service, and enhanced reliability. Moving to slide 6.
Speaker #2: Mark. In midstream, we've built an asset base that offers flexibility and reliability for our customers. We've increased adjusted EBITDA by 40% since 2022, and we've delivered approximately $1 billion of adjusted EBITDA in the fourth quarter of 2025.
We intend to deliver increasing returns improved, customer service, and enhance reliability.
Moving to slide 6.
Speaker #2: Our growth and our performance is a result of disciplined execution, which has created a competitive well-headed market value chain. Over the past four years, we have high-graded and simplified our portfolio, we bought in PSXP and DCP, and we expanded the Sweeney hub.
.5 billion by year, end 2027
We anticipate adding a gas plant about every 12 to 18 months due to our attractive footprint in the Permian Basin.
Speaker #2: Additionally, our recent Pinnacle and Coastal Bin acquisitions are performing above expectations, both operationally and financially, improving our acquisition multiple by about half a turn.
For example, we commissioned the dose Picos 2 gas plant in 2025.
And we announced the iron Mesa gas plant, which is expected to be in service in early 2027.
These plant volumes support our NGL growth.
Speaker #2: We intend to deliver increasing returns, improve customer service, and enhance reliability. Moving to slide six, the platform that we have developed has paved the way to growth opportunities that provide line of sight to a run-rate adjusted EBITDA of approximately $4.5 billion by year-end 2027.
Rich Harbison: The platform that we have developed has paved the way to growth opportunities that provide line of sight to a run-rate adjusted EBITDA of approximately $4.5 billion by year-end 2027. We anticipate adding a gas plant about every 12 to 18 months due to our attractive footprint in the Permian Basin. For example, we commissioned the Dos Picos II gas plant in 2025, and we announced the Iron Mesa gas plant, which is expected to be in service in early 2027. These plant volumes support our NGL growth. We completed the first phase of our Coastal Bend pipeline expansion, and we are bringing online incremental capacity of 125,000 barrels a day in late 2026. In addition to these larger projects, we continue to identify low-capital, high-return organic growth opportunities across multiple basins. We are positioned to deliver mid-single-digit adjusted EBITDA growth, which will support our corporate capital allocation priorities.
Donald J. Baldridge: The platform that we have developed has paved the way to growth opportunities that provide line of sight to a run-rate adjusted EBITDA of approximately $4.5 billion by year-end 2027. We anticipate adding a gas plant about every 12 to 18 months due to our attractive footprint in the Permian Basin. For example, we commissioned the Dos Picos II gas plant in 2025, and we announced the Iron Mesa gas plant, which is expected to be in service in early 2027. These plant volumes support our NGL growth. We completed the first phase of our Coastal Bend pipeline expansion, and we are bringing online incremental capacity of 125,000 barrels a day in late 2026. In addition to these larger projects, we continue to identify low-capital, high-return organic growth opportunities across multiple basins. We are positioned to deliver mid-single-digit adjusted EBITDA growth, which will support our corporate capital allocation priorities.
We completed the first phase of our Coastal ban pipeline expansion and we are bringing online, incremental capacity of 125,000 barrels a day in late 2026.
In addition to these larger projects, we continue to identify low Capital High return, organic growth opportunities across multiple basins.
Speaker #2: We anticipate adding a gas plant about every 12 to 18 months, due to our attractive footprint in the Permian Basin. For example, we commissioned the Dos Picos 2 gas plant in 2025.
We are positioned to deliver mid single digit. Adjusted EBA dog growth.
Which will support our corporate Capital allocation priorities.
Speaker #2: And we announced the Iron Mesa gas plant, which is expected to be in service in early 2027. These plant volumes support our NGL growth.
Our team continues to execute at a high level on a day-to-day basis.
We have great momentum to deliver on our growth plans.
Now, I'll turn the call over to Kevin.
Thank you, Don.
Speaker #2: We completed the first phase of our Coastal Bend pipeline expansion, and we are bringing online incremental capacity of 125,000 barrels a day in late 2026.
Speaker #2: In addition to these larger projects, we continue to identify low-capital, high-return organic growth opportunities across multiple basins. We are positioned to deliver mid-single-digit adjusted EBITDA growth, which will support our corporate capital allocation priorities.
On slide 7 Midstream adjusted. Evita covers 2 important priorities, a secure competitive and growing dividend of approximately 2 billion dollars and sustaining capital of approximately 1 billion.
This leaves the balance of cash flows available for a creative growth opportunities, share repurchases and debt reduction.
Further at our targeted debt level of 17 billion dollars. Total debt would be approximately 3 times the adjusted ibida from Midstream and marketing and specialties
Speaker #2: Our team continues to execute at a high level on a day-to-day basis. We have great momentum to deliver on our growth plans. Now I'll turn the call over
Speaker #2: Our team continues to execute at a high level on a day-to-day basis. We have great momentum to deliver on our growth plans. Now I'll turn the call over to Kevin.
Rich Harbison: Our team continues to execute at a high level on a day-to-day basis. We have great momentum to deliver on our growth plans. Now I'll turn the call over to Kevin.
Donald J. Baldridge: Our team continues to execute at a high level on a day-to-day basis. We have great momentum to deliver on our growth plans. Now I'll turn the call over to Kevin.
Leaving refining, essentially debt-free.
We remain committed to a conservative balance sheet and to returning greater than 50% of net, operating cash flow to shareholders through dividends and share repurchases.
Speaker #1: Thank you, Don. On slide seven, midstream adjusted EBITDA covers two important priorities: a secure, competitive, and growing dividend of approximately $2 billion, and sustaining capital of approximately $1 billion.
Kevin Mitchell: Thank you, Don. On slide 7, midstream adjusted EBITDA covers two important priorities: a secure, competitive, and growing dividend of approximately $2 billion and sustaining capital of approximately $1 billion. This leaves the balance of cash flows available for accretive growth opportunities, share repurchases, and debt reduction. Further, at our targeted debt level of $17 billion, total debt would be approximately three times the adjusted EBITDA for midstream and marketing and specialties, leaving refining essentially debt-free. We remain committed to a conservative balance sheet and to returning greater than 50% of net operating cash flow to shareholders through dividends and share repurchases. On slide 8, Q4 reported earnings were $2.9 billion or $7.17 per share. Adjusted earnings were $1 billion or $2.47 per share. Both reported and adjusted earnings include the final $239 million pre-tax impact of accelerated depreciation associated with idling the Los Angeles refinery.
Kevin Mitchell: Thank you, Don. On slide 7, midstream adjusted EBITDA covers two important priorities: a secure, competitive, and growing dividend of approximately $2 billion and sustaining capital of approximately $1 billion. This leaves the balance of cash flows available for accretive growth opportunities, share repurchases, and debt reduction. Further, at our targeted debt level of $17 billion, total debt would be approximately three times the adjusted EBITDA for midstream and marketing and specialties, leaving refining essentially debt-free. We remain committed to a conservative balance sheet and to returning greater than 50% of net operating cash flow to shareholders through dividends and share repurchases. On slide 8, Q4 reported earnings were $2.9 billion or $7.17 per share. Adjusted earnings were $1 billion or $2.47 per share. Both reported and adjusted earnings include the final $239 million pre-tax impact of accelerated depreciation associated with idling the Los Angeles refinery.
On slide 8, fourth quarter reported earnings were 2.9 billion dollars or $7.17 per share.
Adjusted earnings were 1, billion dollars or $2.47 per share.
Speaker #1: This leaves the balance of cash flows available for a creative growth opportunities share repurchases and debt reduction. Further, at our targeted debt level of $17 billion, total debt would be approximately three times the adjusted EBITDA for midstream and marketing and specialties.
Both reported and adjusted earnings include the final 239. Million pre-tax impact of accelerated depreciation associated with idling the Los Angeles refinery.
Capital spending for the quarter was 682 million.
We generated 2.8 billion of operating cash flow.
Speaker #1: Leaving Refining essentially committed to a conservative balance sheet and to returning greater than 50% of net operating cash flow to shareholders through dividends and share repurchases.
we returned 756 million to shareholders, including 274 million of Sheri purchases
Net debt to Capital was 38%.
Speaker #1: On slide eight, fourth quarter reported earnings were $2.9 billion, or $7.17 per share. Adjusted earnings were $1 billion, or $2.47 per share. Both reported and adjusted earnings include the final $239 million pre-tax impact of accelerated depreciation associated with idling the Los Angeles refinery.
I will now cover the segment results on slide 9
Total company adjusted earnings were flat for the quarter at 1 billion.
with sequential improvements in refining, renewable fuels and Midstream mostly offsetting decreases in chemicals and marketing and specialties
Midstream results increased mainly due to higher volumes, partly offset by lower margins.
Speaker #1: Capital spending for the quarter was $682 million. We generated $2.8 billion of operating cash flow. We returned $756 million to shareholders, including $274 million of share repurchases.
Kevin Mitchell: Capital spending for the quarter was $682 million. We generated $2.8 billion of operating cash flow. We returned $756 million to shareholders, including $274 million of share repurchases. Net debt to capital was 38%. I will now cover the segment results on slide 9. Total company adjusted earnings were flat for the quarter at $1 billion, with sequential improvements in refining, renewable fuels, and midstream, mostly offsetting decreases in chemicals, marketing, and specialties. Midstream results increased mainly due to higher volumes, partly offset by lower margins. In chemicals, results decreased mainly due to lower polyethylene margins driven by lower sales prices. Refining results benefited from the acquisition of WRB. Additionally, we saw higher realized margins in the Gulf Coast, partly offset by weaker central corridor crack spreads.
Kevin Mitchell: Capital spending for the quarter was $682 million. We generated $2.8 billion of operating cash flow. We returned $756 million to shareholders, including $274 million of share repurchases. Net debt to capital was 38%. I will now cover the segment results on slide 9. Total company adjusted earnings were flat for the quarter at $1 billion, with sequential improvements in refining, renewable fuels, and midstream, mostly offsetting decreases in chemicals, marketing, and specialties. Midstream results increased mainly due to higher volumes, partly offset by lower margins. In chemicals, results decreased mainly due to lower polyethylene margins driven by lower sales prices. Refining results benefited from the acquisition of WRB. Additionally, we saw higher realized margins in the Gulf Coast, partly offset by weaker central corridor crack spreads.
In chemicals results, decreased mainly due to lower polyethylene, margins driven by lower sales prices.
Refining results benefited from the acquisition of WRB.
Additionally we saw higher realized margins in the Gulf Coast, partly offset by weaker central, Corridor crack spreads.
Speaker #1: Net debt to capital was 38%. I will now cover the segment results on slide nine. Total company adjusted earnings were flat for the quarter at $1 billion.
Marketing and Specialties results decreased primarily due to the sale of a 65% interest in the Germany and Austria retail marketing business and seasonally lower domestic margins.
Speaker #1: With sequential improvements in refining, renewable fuels, and midstream, mostly offsetting decreases in chemicals and marketing and specialties. Midstream results increased mainly due to higher volumes, partly offset by lower margins.
Partly offset by higher UK, margins and lower costs.
In renewable fuels results improved primarily due to higher realized margins, including inventory impacts partly offset by lower credits.
Slide 10 shows cash flow for the fourth quarter.
Speaker #1: In Chemicals, results decreased mainly due to lower polyethylene margins driven by lower sales prices. Refining results benefited from the acquisition of WRB. Additionally, we saw higher realized margins in the Gulf Coast, partly offset by weaker Central Corridor crack spreads.
Cash from operations of 2.8, billion included, a 708 million working capital benefit due to an inventory reduction.
Partly offset by the impact of falling prices on our net receivables and payables position.
Speaker #1: Marketing and specialties results decreased primarily due to the sale of a 65% interest in the Germany and Austria retail marketing business, and seasonally lower domestic margins.
Kevin Mitchell: Marketing and specialties results decreased primarily due to the sale of a 65% interest in the Germany and Austria retail marketing business and seasonally lower domestic margins, partly offset by higher UK margins and lower costs. In renewable fuels, results improved primarily due to higher realized margins, including inventory impacts, partly offset by lower credits. Slide 10 shows cash flow for Q4. Cash from operations of $2.8 billion included a $708 million working capital benefit due to an inventory reduction, partly offset by the impact of falling prices on our net receivables and payables position. We received $1.5 billion from the sale of a 65% interest in the Germany and Austria retail marketing business. We repaid over $2 billion in debt and acquired the remaining 50% interest in WRB. We funded $682 million of capital spending and returned $756 million to shareholders through share repurchases and dividends.
Kevin Mitchell: Marketing and specialties results decreased primarily due to the sale of a 65% interest in the Germany and Austria retail marketing business and seasonally lower domestic margins, partly offset by higher UK margins and lower costs. In renewable fuels, results improved primarily due to higher realized margins, including inventory impacts, partly offset by lower credits. Slide 10 shows cash flow for Q4. Cash from operations of $2.8 billion included a $708 million working capital benefit due to an inventory reduction, partly offset by the impact of falling prices on our net receivables and payables position. We received $1.5 billion from the sale of a 65% interest in the Germany and Austria retail marketing business. We repaid over $2 billion in debt and acquired the remaining 50% interest in WRB. We funded $682 million of capital spending and returned $756 million to shareholders through share repurchases and dividends.
We received 1.5 billion from the sale of a 65 interest in the Germany and Austria retail marketing business.
Speaker #1: Partly offset by higher UK margins and lower costs. In renewable fuels, results improved primarily due to higher realized margins, including inventory impacts, partly offset by lower credits.
We funded 682 million of capital spending and returned 756 million to shareholders, through Sheri purchases and dividends.
Our ending cash balance was 1.1 billion dollars.
Speaker #1: Slide 10 shows cash flow for the fourth quarter. Cash from operations of $2.8 billion included a $708 million working capital benefit due to an inventory reduction, partly offset by the impact of falling prices on our net receivables and payables position.
Looking ahead to 2026 on slide 11.
Global on P, utilization rates to be in the mid-90s.
We anticipate corporate and other costs to be between 400 and 420 million.
Speaker #1: We received $1.5 billion from the sale of a $65% interest in the Germany and Austria retail marketing business. We repaid over $2 billion in debt and acquired the remaining 50% interest in WRB.
Beginning in 2026 costs associated with the idle. Los Angeles, Refinery will be reported in corporate and other
In refining, we expect the worldwide crude utilization rate to be in the low 90s.
Turnaround, expense is expected to be between 170 and 190 million.
Speaker #1: We funded $682 million of capital spending and returned $756 million to shareholders through share repurchases and dividends. Our ending cash balance was $1.1 billion.
For the full year, we expect turnaround expenses to be between 500, and 550, and 600 million.
Kevin Mitchell: Our ending cash balance was $1.1 billion. Looking ahead to 2026 on slide 11, in the first quarter, we expect the global O&P utilization rate to be in the mid-90s. We anticipate corporate and other costs to be between $400 and $420 million. Beginning in 2026, costs associated with the idled Los Angeles refinery will be reported in corporate and other. In refining, we expect the worldwide crude utilization rate to be in the low 90s. Turnaround expense is expected to be between $170 and $190 million. For the full year, we expect turnaround expenses to be between $550 and $600 million. Utilization rates and turnaround expenses by region are provided in the appendix. We expect corporate and other costs to be between $1.5 and $1.6 billion. Depreciation and amortization is expected to be between $2.1 and $2.3 billion. Moving to slide 12, Mark will now provide some final thoughts.
Kevin Mitchell: Our ending cash balance was $1.1 billion. Looking ahead to 2026 on slide 11, in the first quarter, we expect the global O&P utilization rate to be in the mid-90s. We anticipate corporate and other costs to be between $400 and $420 million. Beginning in 2026, costs associated with the idled Los Angeles refinery will be reported in corporate and other. In refining, we expect the worldwide crude utilization rate to be in the low 90s. Turnaround expense is expected to be between $170 and $190 million. For the full year, we expect turnaround expenses to be between $550 and $600 million. Utilization rates and turnaround expenses by region are provided in the appendix. We expect corporate and other costs to be between $1.5 and $1.6 billion. Depreciation and amortization is expected to be between $2.1 and $2.3 billion. Moving to slide 12, Mark will now provide some final thoughts.
Utilization rates and turnaround expenses by region are provided in the appendix.
Speaker #1: Looking ahead to 2026, on slide 11, in the first quarter, we expect the global ONP utilization rate to be in the mid-90s. We anticipate corporate and other costs to be between $400 million and $420 million, beginning in 2026.
We expect corporate and other costs to be between 1.5 and 1.6 billion dollars.
Depreciation and amortization is expected to be between 2.1 and 2.3 billion.
Speaker #1: Costs associated with the idled Los Angeles refinery will be reported in Corporate and Other. In Refining, we expect the worldwide crude utilization rate to be in the low 90s.
Moving to slide 12 Mark will now provide some final thoughts. We will then open the line for questions after which, Sean will wrap up the call.
2025 was a pivotal year for Philip 66.
Speaker #1: Turnaround expense is expected to be between $170 and $190 million. For the full year, we expect turnaround expenses to be between $550 and $600 million utilization rates and turnaround expenses by region are provided in the appendix.
Over the last 4 years, we've been laser focused on improving performance in advancing our strategy.
We reduced cost.
Simplified the company and made tough decisions.
We streamline leadership reduced headcount. Outsourced work and rationalized our refining footprint
In 2025, we began to see the benefits of the discipline.
Speaker #1: We expect corporate and other costs to be between $1.5 and $1.6 billion. Depreciation and amortization is expected to be between $2.1 and $2.3 billion.
Solid consistent results, which were excited to build upon.
We monetized more than 5 billion dollars of assets and leaned into our integrated portfolio.
Speaker #1: Moving to slide 12, Mark will now provide some final thoughts. We will then open the line for questions, after which Sean will wrap up the call.
We build a competitive Wellhead to Market position in Midstream and we raised the bar and refining our teams responded.
Kevin Mitchell: We will then open the line for questions, after which Sean will wrap up the call.
Mark Lashier: We will then open the line for questions, after which Sean will wrap up the call.
And we're driving toward world-class performance and we're excited about what we'll do.
Speaker #2: 2025 was a pivotal year for Phillips 66. Over the last four years, we've been laser-focused on improving performance and advancing our strategy. We reduced costs, simplified the company, and made tough decisions.
Mark Lashier: 2025 was a pivotal year for Phillips 66. Over the last four years, we've been laser-focused on improving performance and advancing our strategy. We reduced cost, simplified the company, and made tough decisions. We streamlined leadership, reduced headcount, outsourced work, and rationalized our refining footprint. In 2025, we began to see the benefits of the discipline: solid, consistent results, which we're excited to build upon. We monetized more than $5 billion of assets and leaned into our integrated portfolio. We built a competitive well-head-to-market position in midstream, and we raised the bar in refining. Our teams responded, and we're driving toward world-class performance, and we're excited about what we'll do. Our assets work together. They complement one another, and our people maximize their value. We build a culture of ownership and accountability.
Mark Lashier: 2025 was a pivotal year for Phillips 66. Over the last four years, we've been laser-focused on improving performance and advancing our strategy. We reduced cost, simplified the company, and made tough decisions. We streamlined leadership, reduced headcount, outsourced work, and rationalized our refining footprint. In 2025, we began to see the benefits of the discipline: solid, consistent results, which we're excited to build upon. We monetized more than $5 billion of assets and leaned into our integrated portfolio. We built a competitive well-head-to-market position in midstream, and we raised the bar in refining. Our teams responded, and we're driving toward world-class performance, and we're excited about what we'll do. Our assets work together. They complement one another, and our people maximize their value. We build a culture of ownership and accountability.
Our assets work together, the compliment, 1 another and our people maximize their value.
Speaker #2: We streamlined leadership, reduced headcount, outsourced work, and rationalized our refining footprint. In 2025, we began to see the benefits of the discipline: solid, consistent results, which we're excited to build upon.
We build a culture of ownership and accountability, we've challenged every employee to step up and aligned incentives. So more of our people think and act like owners
Going forward, our priorities are clear safe, reliable operations.
Continuous Improvement.
Speaker #2: We monetized more than $5 billion of assets and leaned into our integrated portfolio. We built a competitive, well-headed market position in midstream, and we raised the bar in refining.
And discipline, Capital allocation, that returns cash to shareholders. Now while funding a creative returns that generate even more cash over time.
This is a competitive business and we have to earn investors trust every day.
We have momentum.
Speaker #2: Our teams responded. And we're driving toward world-class performance and we're excited about what we'll do. Our assets work together. They complement one another. And our people maximize their value.
And we're confident that we can rise to the challenge and deliver for our shareholders.
Results matter and in 2025, you've seen a positive inflection point in our results.
And The Best Is Yet To Come.
Speaker #2: We build a culture of ownership and accountability. We've challenged every employee to step up and aligned incentives so more of our people think and act like owners.
Thank you, Mark. We will now begin the question and answer session.
Mark Lashier: We've challenged every employee to step up and aligned incentives so more of our people think and act like owners. Going forward, our priorities are clear: safe, reliable operations, continuous improvement, and disciplined capital allocation that returns cash to shareholders now while funding accretive returns that generate even more cash over time. This is a competitive business, and we have to earn investors' trust every day. We have momentum, and we're confident that we can rise to the challenge and deliver for our shareholders. Results matter, and in 2025, you've seen a positive inflection point in our results, and the best is yet to come.
Mark Lashier: We've challenged every employee to step up and aligned incentives so more of our people think and act like owners. Going forward, our priorities are clear: safe, reliable operations, continuous improvement, and disciplined capital allocation that returns cash to shareholders now while funding accretive returns that generate even more cash over time. This is a competitive business, and we have to earn investors' trust every day. We have momentum, and we're confident that we can rise to the challenge and deliver for our shareholders. Results matter, and in 2025, you've seen a positive inflection point in our results, and the best is yet to come.
As we open the call for questions as it currently for all participants please let me know yourself to 1 question and 1 follow-up.
Speaker #2: Going forward, our priorities are clear. Safe, reliable operations, continuous improvement, and disciplined capital allocation that returns cash to shareholders now while funding accretive returns that generate even more cash over time.
if you have a question, please press star, then 1 on your touchtone phone, if you wish to be removed from the queue, please press star, then to
if you're using a speaker-phone, 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.
Speaker #2: This is a competitive business, and we have to earn investors' trust every day. We have momentum, and we're confident that we can rise to the challenge and deliver for our shareholders.
First question comes from Steven Steve Richardson with evercore isi. Your line is open. Please go ahead.
Speaker #2: Results matter, and in 2025, you've seen a positive inflection point in our results. And the best is yet to come.
Speaker #1: Thank you, Mark. We will now begin the question-and-answer session. As we open the call for questions, as occurred today for all participants, please limit yourself to one question and one follow-up.
Operator: Thank you, Mark. We will now begin the question-and-answer session. As we open the call for questions, as a courtesy for all participants, please limit yourself to one question and one follow-up. If you have a question, please press star, then 1 on your touch-tone phone. If you wish to be removed from the queue, please press star, then 2. 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 touch-tone phone. First question comes from Stephen Richardson with Evercore ISI. Your line is open. Please go ahead.
Operator: Thank you, Mark. We will now begin the question-and-answer session. As we open the call for questions, as a courtesy for all participants, please limit yourself to one question and one follow-up. If you have a question, please press star, then 1 on your touch-tone phone. If you wish to be removed from the queue, please press star, then 2. 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 touch-tone phone. First question comes from Stephen Richardson with Evercore ISI. Your line is open. Please go ahead.
Hi. Thank you. Um, I was wondering if we could start, uh, on the central Corridor please. Um, can you talk about your outlook for Mid-Continent products and opportunities. You see on the feed, talk side, particularly now that you have a quarter plus of WRB Consolidated, uh, appreciate the comment and the prepared remarks about the 40% uh increase in exposure to Canadian Heavies. But wondering if we could dig in their first please.
Speaker #1: If you have a question, please press star, then one on your touch-tone phone. If you wish to be removed from the queue, please press star, then two.
Speaker #1: 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 one on your touch-tone phone.
Hey Steve. This is Brian. Um in padd 2, we have our maximum integration between a refining, Midstream and marketing assets,
and as you probably know, we're 1 of the largest importers of Canadian crude from a crude perspective Pad 2 is the first stop for this advantage to heavy Canadian crude
Speaker #1: First question comes from Stephen Richardson with Evercore ISI. Your line is open. Please go
Speaker #1: ahead. Hi, thank you.
[Analyst] (Evercore ISI): Hi. Thank you. I was wondering if we could start on the Central Corridor, please. Can you talk about your outlook for mid-continent products and opportunities you see on the feedstock side, particularly now that you have a quarter-plus of WRB consolidated? Appreciate the comment and the prepared remarks about the 40% increase in exposure to Canadian heavies, but wondering if we could dig in there first, please.
Stephen Richardson: Hi. Thank you. I was wondering if we could start on the Central Corridor, please. Can you talk about your outlook for mid-continent products and opportunities you see on the feedstock side, particularly now that you have a quarter-plus of WRB consolidated? Appreciate the comment and the prepared remarks about the 40% increase in exposure to Canadian heavies, but wondering if we could dig in there first, please.
Speaker #3: I was wondering if we could start on the Central Corridor, please. Can you talk about your outlook for mid-continent products and opportunities you see on the feedstock side, particularly now that you have a quarter-plus of WRB consolidated? Appreciate the comment in the prepared remarks about the 40% increase in exposure to Canadian heavies.
We um we also have uh, crude optionality. With various Cushing crew, grades and Advantage, Crews directly from the Wellhead in padd 2 and the winding heavy. Dips are a Tailwind, a strong Tailwind for the business. And as you heard in the intro, we've seen those dips widen by 4 dollars since our purchase of WRB.
Speaker #3: But wondering if we could dig in there first.
Speaker #4: Hi, Steve. This is Brian. In the past two years, we have our maximum integration between our refining, midstream, and marketing assets. As you probably know, we're one of the largest importers of Canadian crude from a crude perspective.
Rich Harbison: Hey, Steve. This is Brian. In PAD 2, we have our maximum integration between our refining, midstream, and marketing assets. As you probably know, we're one of the largest importers of Canadian crude. From a crude perspective, PAD 2 is the first stop for this advantaged heavy Canadian crude. We also have crude optionality with various Canadian crude grades and advantaged crudes directly from the wellhead in PAD 2. The widening heavy dips are a tailwind, a strong tailwind for the business. As you heard in the intro, we've seen those dips widen by $4 since our purchase of WRB. Our sensitivities indicate that each dollar is worth $140 million in yearly earnings for the crude dip. Additionally, PAD 2 is expected to have the most robust demand profile for the next decade, with gasoline stable and with diesel and jet continuing to grow.
Rich Harbison: Hey, Steve. This is Brian. In PAD 2, we have our maximum integration between our refining, midstream, and marketing assets. As you probably know, we're one of the largest importers of Canadian crude. From a crude perspective, PAD 2 is the first stop for this advantaged heavy Canadian crude. We also have crude optionality with various Canadian crude grades and advantaged crudes directly from the wellhead in PAD 2. The widening heavy dips are a tailwind, a strong tailwind for the business. As you heard in the intro, we've seen those dips widen by $4 since our purchase of WRB. Our sensitivities indicate that each dollar is worth $140 million in yearly earnings for the crude dip. Additionally, PAD 2 is expected to have the most robust demand profile for the next decade, with gasoline stable and with diesel and jet continuing to grow.
Our sensitivities indicate, uh, that, uh, each dollar is worth 140 million in yearly earnings for the, the crew dip. Additionally Pad 2 is expected to have the most robust uh demand profile for the next decade with gasoline stable, and with a diesel and Jet continuing to grow.
Speaker #4: Pad 2 is the first stop for this advantage to heavy Canadian crude. We also have crude optionality with various Cushing crude grades and advantage crudes directly from the wellhead.
Speaker #4: In Pad Two, and the widening heavy diffs are a tailwind—a strong tailwind—for the business. And as you heard in the intro, we've seen those diffs widen by $4 since our purchase of WRB.
Assets in the market. And we have a strong supply of WCS and other Crews and good product demand. So margins should be very supportive. Also, the ability of our commercial team to extract optionality from the assets and extract optionality from the integration of the assets, provide additional value. And then finally I'd say the Western pipeline will help raise demand prepared to products to fill a short in padd 5.
Speaker #4: Our sensitivities indicate that each dollar is worth $140 million in yearly earnings for the crude diff. Additionally, pad two is expected to have the most robust demand profile for the next decade with gasoline stable and with diesel and jet continuing to grow.
That's great. Thanks Brandon. Um I was wondering if we could follow up a little bit on costs, you've shown pretty good incremental, progress on controllable refining costs this quarter particularly relative to last year's um fourth quarter. Can you talk about your 2026 priorities on the cost Outlook? This is probably for rich but you know particularly as you have you know really improved utilization rate and clean product yields. So significantly
Speaker #4: We have really well-positioned assets in the market, and we have a strong supply of WCS and other crudes, and good product demand. So, margins should be very supportive.
Rich Harbison: We have really well-positioned assets in the market, and we have a strong supply of WCS and other crudes and good product demand, so margins should be very supportive. Also, the ability of our commercial team to extract optionality from the assets and extract optionality from the integration of the assets provides additional value. And then finally, I'd say the western pipeline will help raise demand for PAD 2 products to fill short in PAD 5.
Rich Harbison: We have really well-positioned assets in the market, and we have a strong supply of WCS and other crudes and good product demand, so margins should be very supportive. Also, the ability of our commercial team to extract optionality from the assets and extract optionality from the integration of the assets provides additional value. And then finally, I'd say the western pipeline will help raise demand for PAD 2 products to fill short in PAD 5.
Speaker #4: Also, the ability of our commercial team to extract optionality from the assets and extract optionality from the integration of the assets provides additional value.
Yeah, thanks. This is Rich. Um, you know, maybe I'll just start with a little bit of a recap of the fourth quarter, which, which is, uh, really set in the base for the 2026 performance. And and uh, it has some really good highlights here to show. We were 5.96 cents in the fourth quarter.
Speaker #4: And then finally, I'd say the Western pipeline will help raise demand for pad two products to fill a short in pad five.
Speaker #3: That's great, thanks, Brian. I was wondering if we could follow up a little bit on costs. You've shown pretty good incremental progress on controllable refining costs this quarter, particularly relative to last year's fourth quarter.
[Analyst] (Evercore ISI): That's great. Thanks, Brian. I was wondering if we could follow up a little bit on costs. You've shown pretty good incremental progress on controllable refining costs this quarter, particularly relative to last year's fourth quarter. Can you talk about your 2026 priorities on the cost outlook? This is probably for Rich, but particularly as you have really improved utilization rate and clean product yield so significantly.
Stephen Richardson: That's great. Thanks, Brian. I was wondering if we could follow up a little bit on costs. You've shown pretty good incremental progress on controllable refining costs this quarter, particularly relative to last year's fourth quarter. Can you talk about your 2026 priorities on the cost outlook? This is probably for Rich, but particularly as you have really improved utilization rate and clean product yield so significantly.
Which is, uh, clearly a nice Improvement order over a quarter but in directionally heading towards that 5.50, uh, Target that we're up. You know, regionally, we saw some volume on the denominator side change. So, of course, we had the Los Angeles, Refinery idling, and then the WRB acquisition. So, those those have subtle impacts to the calculation.
Speaker #3: Can you talk about your 2026 priorities on the cost outlook? This is probably for Rich, but particularly as you have really improved utilization rate and clean product yield so significantly.
Speaker #4: Yeah, thanks. This is Rich. Maybe I'll just start with a little bit of a recap of the fourth quarter, which is a really set the base for the 2026 performance.
Rich Harbison: Yeah. Thanks. This is Rich. Maybe I'll just start with a little bit of a recap of the fourth quarter, which is really setting the base for the 2026 performance. It has some really good highlights here to show. We were $5.96 in the fourth quarter, which is clearly a nice improvement quarter-over-quarter and directionally heading towards that $5.50 target that we're up. Regionally, we saw some volume on the denominator side change. Of course, we had the Los Angeles refinery idling and then the WRB acquisition. Those have subtle impacts to the calculation. The primary headwinds we saw in the fourth quarter were really the natural gas pricing had increased. That was about a $0.13-a-barrel headwind for us. Also, the Los Angeles refinery idling was also a big expense.
Rich Harbison: Yeah. Thanks. This is Rich. Maybe I'll just start with a little bit of a recap of the fourth quarter, which is really setting the base for the 2026 performance. It has some really good highlights here to show. We were $5.96 in the fourth quarter, which is clearly a nice improvement quarter-over-quarter and directionally heading towards that $5.50 target that we're up. Regionally, we saw some volume on the denominator side change. Of course, we had the Los Angeles refinery idling and then the WRB acquisition. Those have subtle impacts to the calculation. The primary headwinds we saw in the fourth quarter were really the natural gas pricing had increased. That was about a $0.13-a-barrel headwind for us. Also, the Los Angeles refinery idling was also a big expense.
Speaker #4: And it has some really good highlights here to show. We were at $5.96 in the fourth quarter, which is clearly a nice improvement quarter over quarter.
Speaker #4: And directionally heading towards that $5.50 target that we're up. Regionally, we saw some volume on the denominator side change. So, of course, we had the Los Angeles refinery idling, and then the WRB acquisition.
Speaker #4: So, those have subtle impacts to the calculation. The primary headwinds we saw in the fourth quarter were really that natural gas pricing had increased.
The, the primary headwinds we saw on the fourth quarter were really the natural gas pricing, uh, had increased, that was about a 13 cent, a barrel, uh, headwind for us but also, the Los Angeles. Refinery idling was also a big expense. We had a lot of expense there as we we wound down that operation and put it in a safe position and um, we had essentially no barrels throughput through that. So if, if we were to exclude that cost from from our calculation for the fourth quarter, our actual fourth quarter performance was around 5 dollars, fifty cents, 57 cents a barrel. So very strong performance by the organization even in the headwinds of of this. So I, you know, I'm very optimistic. We're on track for this 5.50 target, you know, that going forward in 26, uh, you know, the, the idling of the Los Angeles Refinery will have a positive influence on an annualized basis of about 30 cents a barrel. So, so that's a positive uh,
Speaker #4: That was about a $0.13-per-barrel headwind for us. But also, the Los Angeles refinery idling was also a big expense. We had a lot of expense there as we wound down that operation and put it in a safe position.
Rich Harbison: We had a lot of expense there as we wound down that operation and put it in a safe position. We had essentially no barrels throughput through that. So if we were to exclude that cost from our calculation for the fourth quarter, our actual fourth-quarter performance was around $5.57 a barrel. Very strong performance by the organization, even in the headwinds of this. I'm very optimistic. We're on track for this $5.50 target. Going forward in 2026, the idling of the Los Angeles refinery will have a positive influence on an annualized basis of about $0.30 a barrel. That's a positive tailwind for us. Also, probably as important is our organization and the continuous improvement effort our organization has really built into how we do our business day in and day out. We're targeting another $0.15-a-barrel reduction on that by year-end 2026.
Rich Harbison: We had a lot of expense there as we wound down that operation and put it in a safe position. We had essentially no barrels throughput through that. So if we were to exclude that cost from our calculation for the fourth quarter, our actual fourth-quarter performance was around $5.57 a barrel. Very strong performance by the organization, even in the headwinds of this. I'm very optimistic. We're on track for this $5.50 target. Going forward in 2026, the idling of the Los Angeles refinery will have a positive influence on an annualized basis of about $0.30 a barrel. That's a positive tailwind for us. Also, probably as important is our organization and the continuous improvement effort our organization has really built into how we do our business day in and day out. We're targeting another $0.15-a-barrel reduction on that by year-end 2026.
Speaker #4: And we had essentially no barrels throughput through that. So, if we were to exclude that cost from our calculation for the fourth quarter, our actual fourth quarter performance was around $5.50 a barrel.
Enforced. And also probably as important is is our organization and the continuous Improvement effort, our organization has has really built into how we do our business day in and day out. And we're targeting another 15 cents, a barrel reduction on that. By year end 2026, we've got over 300 initiatives that we're working and, uh, a very solid track record of capturing value from this program. So all this is resulting, in what I see, as
Speaker #4: So very strong performance by the organization, even in the headwinds of this. So I'm very optimistic. We're on track for this $5.50 target. Going forward in '26, the idling of the Los Angeles refinery will have a positive influence on our annualized basis of about 30 cents a barrel.
Speaker #4: So that's a positive tailwind for us. And also, probably as important, is our organization and the continuous improvement effort our organization has really built into how we do our business day in and day out.
Speaker #4: And we're targeting another $0.15 per barrel reduction on that by year-end 2026. We've got over 300 initiatives that we're working on, and a very solid track record of capturing value from this program.
Rich Harbison: We've got over 300 initiatives that we're working on and a very solid track record of capturing value from this program. So all this is resulting in what I see as a very structural change in the business, honestly. We've got these organizational changes and work processes that we've put in place, and we've got dedicated resources that are challenging the status quo of everything we do each and every day, trying to find a better way to do it, driving inefficiencies out, eliminating waste. And of course, foundationally of all this is reliability. You've got to be in the market to capture the market. And we're seeing continued progress on our reliability programs, and we have a very safe operation as well, an organization that is committed to safety. So we're making great progress. I'm very excited about it.
Rich Harbison: We've got over 300 initiatives that we're working on and a very solid track record of capturing value from this program. So all this is resulting in what I see as a very structural change in the business, honestly. We've got these organizational changes and work processes that we've put in place, and we've got dedicated resources that are challenging the status quo of everything we do each and every day, trying to find a better way to do it, driving inefficiencies out, eliminating waste. And of course, foundationally of all this is reliability. You've got to be in the market to capture the market. And we're seeing continued progress on our reliability programs, and we have a very safe operation as well, an organization that is committed to safety. So we're making great progress. I'm very excited about it.
A very structural change in the business, honestly. Um, you know, we've got these organizational changes and work processes that we've put in place and we've got dedicated resources that are challenging. The status quo of everything, we do each and every day trying to find a better way to do it. Driving inefficiencies out, uh, eliminating waste, you know, and of course, foundationally. All this is is reliability, you. You've got to be in the market to capture the market and we we're seeing continued progress on a reliability programs and we have a very safe operation as well organization. That is committed to safety. So we're making great progress. I'm I'm very excited about it. I think the cost profiles head in the right direction and we're not done yet.
That's great. Thanks very much.
Speaker #4: So all this is resulting in what I see as a very structural change in the business, honestly, we've got these organizational changes and work processes that we've put in place.
We now send to Neil M with Gordon and sax. Your line is open. Please go ahead.
Speaker #4: And we've got dedicated resources that are challenging the status quo of everything we do each and every day, trying to find a better way to do it—driving inefficiencies out, eliminating waste.
Speaker #4: And, of course, foundationally, all of this is reliability. You've got to be in the market to capture the market. And we're seeing continued progress on our reliability programs.
Speaker #4: And we have a very safe operation, as well as an organization that is committed to safety. So we're making great progress. I'm very excited about it.
Yeah, I just building on the, the operations and refining you talked about, um, operating costs. Can you spend a little time on the turnaround specifically last year? I think you, you were able to beat your turnaround guide in q1. It looks like, uh, you know, you're going to be um, running in the low 90s utilization which is probably better than the than a lot of your peers. So, just your perspective on on uh on how you're managing through the turnarounds and and uh and what you're looking to uh to
Passing class there.
Speaker #4: I think the cost profile is heading in the right direction, and we're not done yet.
Rich Harbison: I think the cost profile is heading the right direction, and we're not done yet.
Rich Harbison: I think the cost profile is heading the right direction, and we're not done yet.
Speaker #3: That's great. Thanks very much.
[Analyst] (Evercore ISI): That's great. Thanks very much.
Stephen Richardson: That's great. Thanks very much.
Hey now this Richie and thanks for, thanks for the question and and uh I think you know, I'm getting a few questions on this r. I 1 thing I want to make clear is the 2025 guidance for turnarounds did not include WRB.
Speaker #1: We now turn to Neil Matter with Goldman Sachs. Your line is open. Please go ahead.
Operator: We now turn to Neil Mehta with Goldman Sachs. Your line is open. Please go ahead.
Operator: We now turn to Neil Mehta with Goldman Sachs. Your line is open. Please go ahead.
Speaker #5: Yeah, just building on the operations and refining, you talked about operating costs. Can you spend a little time on turnaround specifically last year? I think you were able to beat your turnaround guide in Q1.
Neil Mehta: Yeah. Just building on the operations and refining, you talked about operating costs. Can you spend a little time on turnaround specifically? Last year, I think you were able to beat your turnaround guide. In Q1, it looks like you're going to be running in the low 90s utilization, which is probably better than a lot of your peers. Just your perspective on how you're managing through the turnarounds and what you're looking to be best in class there.
Neil Mehta: Yeah. Just building on the operations and refining, you talked about operating costs. Can you spend a little time on turnaround specifically? Last year, I think you were able to beat your turnaround guide. In Q1, it looks like you're going to be running in the low 90s utilization, which is probably better than a lot of your peers. Just your perspective on how you're managing through the turnarounds and what you're looking to be best in class there.
Speaker #5: It looks like you're going to be running in the low 90s utilization, which is probably better than a lot of your peers. Just your perspective on how you're managing through the turnarounds and what you're looking to beat that in class
But, uh, full inclusion of the WRB Assets in that. So when I, when I think about, um,
Uh, 2026.
And how that's is going to move, you know, we see ourselves in a relatively low part of the cycle on the turnarounds.
Speaker #5: there. Hey, Neil, this is Rich again.
Rich Harbison: Hey, Neil. Rich, and thanks for the question. I think I'm getting a few questions on this, Brian. One thing I want to make clear is the 2025 guidance for turnarounds did not include WRB. The 2026 guidance includes 100% WRB. So there is a little bit of basis difference on these turnarounds. So you see a slight uptick in total turnaround costs, but full inclusion of the WRB assets in that. So when I think about 2026 and how that's going to move, we see ourselves in a relatively low part of the cycle on the turnarounds. The TAs are focused primarily in the central corridor with a smaller effort in the Gulf Coast area in 2026 Q1 TAs.
Rich Harbison: Hey, Neil. Rich, and thanks for the question. I think I'm getting a few questions on this, Brian. One thing I want to make clear is the 2025 guidance for turnarounds did not include WRB. The 2026 guidance includes 100% WRB. So there is a little bit of basis difference on these turnarounds. So you see a slight uptick in total turnaround costs, but full inclusion of the WRB assets in that. So when I think about 2026 and how that's going to move, we see ourselves in a relatively low part of the cycle on the turnarounds. The TAs are focused primarily in the central corridor with a smaller effort in the Gulf Coast area in 2026 Q1 TAs.
Speaker #4: Thanks for the question. And I think I'm getting a few questions on this, right? One thing I want to make clear is the 2025 guidance for turnarounds did not include WRB.
Um you know the Tas are focused. Uh primarily in the central Corridor with a smaller effort in the Gulf Coast Area. Um,
Speaker #4: The 2026 guidance includes 100% WRB, so there is a little bit of basis difference on these turnarounds. You see a slight uptick in total turnaround costs, but with full inclusion of the WRB assets in that.
Speaker #4: So when I think about 2026 and how that's going to move, we see ourselves in a relatively low part of the cycle on the turnarounds.
Speaker #4: The TAs are focused primarily in the central corridor with the smaller effort in the Gulf Coast area in '26 first quarter TAs. And that's highlighted in our enhanced information provided at the back end of the presentation here, which is giving you some insight on the quarterly or the areas geographic location of the turnarounds that we're providing.
And 26 first quarter toss and that's uh highlighted in our enhanced uh information provided at the back end of the presentation here, which is giving you some insight on the quarterly or the uh, the the areas, um, Geographic publication of the turnarounds that were that were providing. So we do see a fairly light turnaround cycle even though you see the dollars go up a little bit. It's that really that inclusion of WRB and into it, that's reflecting it. And, um, uh, the other thing to think about, you know, we've often guided to 75 cents a barrel, as, as the impact of of our turnarounds. And, uh, there there is a, a, a slight uptick when, if you were to take WB and, and look at it in isolation, but that's being offset by the idling of the Los Angeles. Refinery. So there's essentially no material change that, that guidance, on an annual basis either. Now
Rich Harbison: And that's highlighted in our enhanced information provided at the back end of the presentation here, which is giving you some insight into the quarterly or the area's geographic location of the turnarounds that we're providing. So we do see a fairly light turnaround cycle. Even though you see the dollars go up a little bit, it's really that inclusion of WRB into it that's reflecting it. And the other thing to think about, we've often guided to $0.75 a barrel as the impact of our turnarounds. And there is a slight uptick if you were to take WRB and look at it in isolation, but that's being offset by the idling of the Los Angeles refinery. So there's essentially no material change to that guidance on an annual basis either, Neil.
Rich Harbison: And that's highlighted in our enhanced information provided at the back end of the presentation here, which is giving you some insight into the quarterly or the area's geographic location of the turnarounds that we're providing. So we do see a fairly light turnaround cycle. Even though you see the dollars go up a little bit, it's really that inclusion of WRB into it that's reflecting it. And the other thing to think about, we've often guided to $0.75 a barrel as the impact of our turnarounds. And there is a slight uptick if you were to take WRB and look at it in isolation, but that's being offset by the idling of the Los Angeles refinery. So there's essentially no material change to that guidance on an annual basis either, Neil.
Yeah.
Speaker #4: So, we do see a fairly light turnaround cycle, even though you see the dollars go up a little bit. It's not really that inclusion of WRB into it that's reflecting it.
Speaker #4: And the other thing to think about—we've often guided to $0.75 a barrel as the impact of our turnarounds. And there is a slight uptick if you were to take WRB and look at it in isolation, but that's being offset by the idling of the Los Angeles refineries.
Yeah, thank you and then, Mark and Kevin followed for you. I think. Kevin, you talked about this 8222 framework? I thought I thought that was a helpful way or moniker for thinking about the cash flow associated with your business. So I guess the 1 of the questions, as you guys are working down the debt towards the 30 bit percent that, that targets your 30% right now is what's the capacity to buy back stock? Um, and so if you could walk through that framework, that would be helpful.
Speaker #4: So there's essentially no material change to that guidance on an annual basis either,
Speaker #4: Neil. Yeah.
Speaker #1: Yeah. Thank you. And then Mark and Kevin, follow-up for you. I think, Kevin, you talked about this 8-2-2-2 framework. I thought that was a helpful way or moniker for thinking about the cash flow associated with your business.
Neil Mehta: Yeah. Thank you. Mark and Kevin, follow up for you. I think, Kevin, you talked about this 8222 framework. I thought that was a helpful way or moniker for thinking about the cash flow associated with your business. I guess one of the questions, as you guys are working down the debt towards the 30% net debt target or 38% right now, is what's the capacity to buy back stock? If you could walk through that framework, that would be helpful.
Neil Mehta: Yeah. Thank you. Mark and Kevin, follow up for you. I think, Kevin, you talked about this 8222 framework. I thought that was a helpful way or moniker for thinking about the cash flow associated with your business. I guess one of the questions, as you guys are working down the debt towards the 30% net debt target or 38% right now, is what's the capacity to buy back stock? If you could walk through that framework, that would be helpful.
Speaker #1: So, I guess one of the questions, as you guys are working down the debt towards the 30% net debt target—we're at 38% right now—is what's the capacity to buy back stock?
Speaker #1: And so, if you could walk through that framework, that would be helpful.
Speaker #4: Yeah, Neil. Actually, I think it's pretty straightforward because we've laid out the debt target and also the 50% or greater of operating cash flow return to shareholders through the dividend and share buyback.
Rich Harbison: Yeah, Neil. I think it's pretty straightforward because we've laid out the debt target and also the 50% or greater of operating cash flow returned to shareholders through the dividend and share buyback. So the dividend, which is secure, competitive, and growing, is right around $2 billion per year. The capital program, and we continue to be very disciplined around how we think about the capital program and the execution against that. The capital budget's $2.4 billion. So that's the second of the twos, so slightly over $2 billion. And then the balance is available for debt reduction and buybacks. And so when you think about an $8 billion operating cash flow, then that means there's just shy of $4 billion available for debt reduction and buybacks. And it would split approximately equally between the two, slightly weighted towards share buybacks if you think about that 50% calculation.
Kevin Mitchell: Yeah, Neil. I think it's pretty straightforward because we've laid out the debt target and also the 50% or greater of operating cash flow returned to shareholders through the dividend and share buyback. So the dividend, which is secure, competitive, and growing, is right around $2 billion per year. The capital program, and we continue to be very disciplined around how we think about the capital program and the execution against that. The capital budget's $2.4 billion. So that's the second of the twos, so slightly over $2 billion. And then the balance is available for debt reduction and buybacks. And so when you think about an $8 billion operating cash flow, then that means there's just shy of $4 billion available for debt reduction and buybacks. And it would split approximately equally between the two, slightly weighted towards share buybacks if you think about that 50% calculation.
Yeah, Neil. It's um, I I actually I think it's pretty straightforward because we've we've laid out the debt Target and also the 50% or greater of operating cash flow return to shareholders through the dividend and share buyback. So the dividend, uh, which is, you know, secure, um, competitive and growing is right around 2 billion per year, the capital program, and we continue to be very disciplined around, how we think about the capital program and the execution against that you put the capital budget is 2.4 billion. So that's, that's the second of the 2's. So slightly over 2 billion and then the balance is available for debt, reduction and BuyBacks. And so, when you think about an 8 billion dollar, operating cash flow, then that means there's just shy of of 4 billion available for debt, reduction and BuyBacks and it would split approximately equally between the 2 slightly weighted towards. Um,
Speaker #4: So the dividend, which is secure, competitive, and growing, is right around $2 billion per year. The capital program—and we continue to be very disciplined around how we think about the capital program and the execution against that.
Speaker #4: We put the capital budget at $2.4 billion, so that's the second of the two—so slightly over $2 billion. And then the balance is available for debt reduction and buybacks.
Speaker #4: And so, when you think about an $8 billion operating cash flow, then that means there's just shy of $4 billion available for debt reduction and buybacks.
Share BuyBacks if you think about that 50% calculation. Um and of course you can change. If you if the operating cash flow is, it will be what it is. And it can Flex up or down, um, from that level. But the framework is there and in place. And so we think that we should be able to reduce debt by somewhere in the order of 1 and a half billion per year for the next 2 years. And that's excluding any additional flexibility. We have with any um asset dispositions that we have not big into our plan. We've not communicated any Targets around that but we continue to work through the um, portfolio and options. We have to monetize non-core. Um, non-strategic assets that may be worth more to others, than to us.
Speaker #4: And it would split approximately equally between the two, slightly weighted towards share buybacks if you think about that 50% calculation. And of course, you can change if the operating cash flow is—it's going to be what it is, and it can flex up or down from that level.
Thanks Jeff.
Rich Harbison: Of course, you can change if the operating cash flow is going to it will be what it is, and it can flex up or down from that level. But the framework is there and in place. So we think that we should be able to reduce debt by somewhere in the order of $1.5 billion per year for the next 2 years. That's excluding any additional flexibility we have with any asset dispositions that we have not baked into our plan. We have not communicated any targets around that, but we continue to work through the portfolio and options we have to monetize non-core, non-strategic assets that may be worth more to others than to us.
Kevin Mitchell: Of course, you can change if the operating cash flow is going to it will be what it is, and it can flex up or down from that level. But the framework is there and in place. So we think that we should be able to reduce debt by somewhere in the order of $1.5 billion per year for the next 2 years. That's excluding any additional flexibility we have with any asset dispositions that we have not baked into our plan. We have not communicated any targets around that, but we continue to work through the portfolio and options we have to monetize non-core, non-strategic assets that may be worth more to others than to us.
We now send to talk like it with wolf research, your line is open, please go ahead.
Oh, thank you. Good morning everybody.
Speaker #4: But the framework is there and in place. And so we think that we should be able to reduce debt by somewhere in the order of $1.5 billion per year for the next two years.
Mark, I'm sure you want to probably um, process off to 1 of the operations guys. But I'm afraid I want to ask you all this question about spreads about Venezuela, but obviously, as and so on and I guess my question is quite simple.
Speaker #4: And that's excluding any additional flexibility we have with any asset dispositions that we have not baked into our plan. We have not communicated any targets around that, but we continue to work through the portfolio and options we have to monetize non-core, non-strategic assets that may be worth more to others than to us.
Speaker #1: Thanks, Kevin. We now turn to Doug Leggett with Wolfe Research. Your line is open. Please go ahead.
Neil Mehta: Thanks, Kevin.
Neil Mehta: Thanks, Kevin.
Operator: We now turn to Doug Leggate with Wolfe Research. Your line is open. Please go ahead.
Operator: We now turn to Doug Leggate with Wolfe Research. Your line is open. Please go ahead.
Speaker #1: ahead. Oh, thank you.
Douglas Leggate: Thank you. Good morning, everybody. Mark, I'm sure you want to probably pass this off to one of the operations guys, but I'm afraid I want to ask the obvious question about spreads, about Venezuela, about WCS, and so on. And I guess my question is quite simple. What's the actual dynamic that's going on in the Gulf Coast from Phillips' perspective? Are you seeing physical barrels beyond the sequestered cargoes that were obviously taken to begin with? And are they competitive? And what I'm really trying to understand is, is the market overreacting here? Because WCS normally widens in the wintertime, and we haven't really seen a ton of physical barrels show up yet. So we're trying to figure out what the market is pricing in here if everybody is competing for these barrels at the same time, including places like India and so on.
Douglas Leggate: Thank you. Good morning, everybody. Mark, I'm sure you want to probably pass this off to one of the operations guys, but I'm afraid I want to ask the obvious question about spreads, about Venezuela, about WCS, and so on. And I guess my question is quite simple. What's the actual dynamic that's going on in the Gulf Coast from Phillips' perspective? Are you seeing physical barrels beyond the sequestered cargoes that were obviously taken to begin with? And are they competitive? And what I'm really trying to understand is, is the market overreacting here? Because WCS normally widens in the wintertime, and we haven't really seen a ton of physical barrels show up yet. So we're trying to figure out what the market is pricing in here if everybody is competing for these barrels at the same time, including places like India and so on.
Speaker #6: Good morning, everybody. Mark, I'm sure you probably want to pass this off to one of the operations guys, but I'm afraid I want to ask the obvious question about spreads, about Venezuela, about WCS, and so on.
Are these what, what's the actual Dynamic that's going on in the Gulf Coast from Phillips perspective? Are you seeing physical barrels beyond the sequestered Cargoes? That were obviously taken to begin with and are they competitive? And what, what I'm really trying to understand is, is the market overreacting here because WCS, normally widens in the wintertime and we haven't really seen a ton of physical barrels show up yet. So we're trying to figure out, you know what, what the market is pricing in here. If it's you know, for everybody, you know is is competing for these barrels at the same time including places like India and so on any color you could offer on your your experience would be appreciated and I got a fully open operations with
Speaker #6: And I guess my question is quite simple. What's the actual dynamic that's going on in the Gulf Coast from Phillips' perspective? Are you seeing physical barrels beyond the sequestered cargos that were obviously taken to begin with?
Speaker #6: And are they competitive? And what I'm really trying to understand is, is the market overreacting here? Because WCS normally widens in the wintertime, and we haven't really seen a ton of physical barrels show up yet.
Speaker #6: So we’re trying to figure out what the market is pricing in here—if it’s everybody competing for these barrels at the same time, including places like India and so on.
Speaker #6: And any color you could offer on your experience would be appreciated. And I've got to follow you up on operations,
Douglas Leggate: Any color you could offer on your experience would be appreciated. I've got to follow you up on operations, please.
Douglas Leggate: Any color you could offer on your experience would be appreciated. I've got to follow you up on operations, please.
Speaker #6: please. Yeah, Doug.
Rich Harbison: Yeah, Doug. Hey, thanks for the question. Yes, we're getting a lot of interest in the impact of Venezuelan crude. And certainly, we welcome the advent of more crude into the system. We've got the flexibility, as you know, to process Venezuelan crude. In fact, I think we've publicly stated we can process about 250,000 barrels a day. And if you look at that as a percentage of our total crude processing capacity, I think we're more heavily weighted, more opportunity there than our peers. And so we're quite interested in being able to do that. And ultimately, we do think that there is an impact on WCS spreads. And there are cargoes of Venezuelan crude coming into the US. Even before Maduro was removed, there were cargoes coming in, and we participated in that from time to time when the economics dictated it.
Rich Harbison: Yeah, Doug. Hey, thanks for the question. Yes, we're getting a lot of interest in the impact of Venezuelan crude. And certainly, we welcome the advent of more crude into the system. We've got the flexibility, as you know, to process Venezuelan crude. In fact, I think we've publicly stated we can process about 250,000 barrels a day. And if you look at that as a percentage of our total crude processing capacity, I think we're more heavily weighted, more opportunity there than our peers. And so we're quite interested in being able to do that. And ultimately, we do think that there is an impact on WCS spreads. And there are cargoes of Venezuelan crude coming into the US. Even before Maduro was removed, there were cargoes coming in, and we participated in that from time to time when the economics dictated it.
Speaker #4: Hey, thanks for the question. Yes, we're getting a lot of interest in the impact of Venezuelan crude, and certainly we welcome the advent of more crude into the system.
Yeah, Doug. Hey, thanks for the question. Yes, we're getting a lot of, uh, interest in the, the impact of Venezuelan crude. And, uh, certainly, uh, we welcome the Advent of more crude into the system. We've got the flexibility as you know, to, to process Venezuelan crude. In fact, I think we've publicly stated we can, we can process about 250,000 barrels a day and if you look at that as a percentage of our total crude processing capacity, I think we're more heavily weighted, more opportunity there than than our peers and so we're quite interested in being able to do that. And ultimately, we do think that there is an impact on WCS, spreads and there are carros of Venezuelan crude coming into the US. Even before Maduro was removed, there were carros coming in and we participated in that from time to time when the economics dictated it. And as you know, we're going to look at the economics, we're going to run our uh, our models and see if it makes sense to process it or not. But we've got the
Speaker #4: We've got the flexibility, as you know, to process Venezuelan crude. In fact, I think we've publicly stated we can process about 250,000 barrels a day.
Speaker #4: And if you look at that as a percentage of our total crude processing capacity, I think we're more heavily weighted, more opportunity there than our peers.
Speaker #4: And so we're quite interested in being able to do that. And ultimately, we do think that there is an impact on WCS spreads. And there are cargos of Venezuelan crude coming into the US; even before Maduro was removed, there were cargos coming in, and we participated in that from time to time when the economics dictated it.
capacity there. We don't have to spend a dime to get there and we're ready to go. So, I'll let Brian, uh, dig into the numbers a little more. Well, of course, like we agree with everything Mark. Said we, we were buying, uh, Venezuelan crude prior to Maduro were buying Venezuelan crude. Now, uh, taking it to a refineries, but even if the event balance well, and the crew doesn't come to a refineries, it hits the global market. It's going to impact heavy crew de differentials and if you even if you and on WCS, if you take a look at wcf's, uh,
Speaker #4: And, as you know, we're going to look at the economics. We're going to run our models and see if it makes sense to process it or not.
Rich Harbison: As you know, we're going to look at the economics. We're going to run our models and see if it makes sense to process it or not. But we've got the capacity there. We don't have to spend a dime to get there, and we're ready to go. So I'll let Brian dig into the numbers a little more.
Rich Harbison: As you know, we're going to look at the economics. We're going to run our models and see if it makes sense to process it or not. But we've got the capacity there. We don't have to spend a dime to get there, and we're ready to go. So I'll let Brian dig into the numbers a little more.
Speaker #4: But we've got the capacity there. We don't have to spend a dime to get there, and we're ready to go. So I'll let Brian dig into the numbers a little more.
Speaker #4: But we've got the capacity there. We don't have to spend a dime to get there, and we're ready to go. So I'll let Brian dig into the numbers a little more.
Speaker #3: Well, of course, I agree with everything Mark said. We were buying Venezuelan crude prior to Maduro. We're buying Venezuelan crude now, taking it to our refineries.
Brian Mandell: Well, of course, I agree with everything Mark said. We were buying Venezuelan crude prior to Maduro. We're buying Venezuelan crude now, taking it to our refineries. But even if the Venezuelan crude doesn't come to our refineries, it hits the global market. It's going to impact heavy crude differentials. And even on WCS, if you take a look at WCS's 2025 differentials versus this year's actuals and forward curve, we're $3.50 weaker in 2026 this year. So the market is a forward market. It's looking at barrels coming on, and it's processing and thinking about what the differentials should be, not just for Venezuelan crude, but for all crudes. And I would say, as Mark said, we look at relative crude values.
Brian Mandell: Well, of course, I agree with everything Mark said. We were buying Venezuelan crude prior to Maduro. We're buying Venezuelan crude now, taking it to our refineries. But even if the Venezuelan crude doesn't come to our refineries, it hits the global market. It's going to impact heavy crude differentials. And even on WCS, if you take a look at WCS's 2025 differentials versus this year's actuals and forward curve, we're $3.50 weaker in 2026 this year. So the market is a forward market. It's looking at barrels coming on, and it's processing and thinking about what the differentials should be, not just for Venezuelan crude, but for all crudes. And I would say, as Mark said, we look at relative crude values.
Speaker #3: But even if the Venezuelan crude doesn't come to our refineries, it hits the global market. It's going to impact heavy crude differentials. And if on WCS, if you take a look at WCS's 2025 differentials versus this year's actuals and forward curve, we're at $3.50 weaker in 2026 than this year.
2025 differentials versus this year's, uh, actuals and forward curve, where 3.50 cents weaker uh, in in 2026 this year. So, the market is a forward Market, it's looking at barrels coming on and it's, uh, processing and thinking about what the differentials should be, not just for Venezuelan food, but for all Crews and I would say, you know, we as Mark said, we look at relative crude, uh values. So when we're thinking about Crews, whether we bring in Venezuela crew to some other crew, with thinking about the cost of the crew, the crew type, the value of the products, the crewed makes Transportation costs. Uh, the specific Refinery that the crew is going to. And we have a lot of flexibility about what Crews we can run in all our refineries. We also have a strong commercial organization and that allows us to uh, redo the crude slate, you know, pretty quickly as the market dictates. So that's also a help. But um, you know, I would also 1 other final point that I haven't heard people talk.
Speaker #3: So the market is a forward market. It's looking at barrels coming on, and it's processing and thinking about what the differentials should be, not just for Venezuelan crude, but for all crudes.
About, which is the heavy nap. And as more heavy nap is sent to the US Gulf Coast for blending Venezuelan. Crews, it's likely to be a benefit to the gasoline margins. Particularly when we're moving into gasoline season,
Speaker #3: And I would say, as Mark said, we look at relative crude values. So, when we're thinking about crudes—whether we bring in Venezuelan crude or some other crude—we're thinking about the cost of the crude, the crude type, the value of the products the crude makes, transportation costs, and the specific refinery that the crude's going to.
Brian Mandell: When we're thinking about crudes, whether we bring in Venezuela crude or some other crude, we're thinking about the cost of the crude, the crude type, the value of the products the crude makes, transportation costs, the specific refinery that the crude's going to. We have a lot of flexibility about what crudes we can run in all our refineries. We also have a strong commercial organization, and that allows us to redo the crude slate pretty quickly as the market dictates. That's also a help. I would also add one other final point that I haven't heard people talk about, which is the heavy naphtha. As more heavy naphtha is sent to the US Gulf Coast for blending Venezuelan crudes, it's likely to be a benefit to the gasoline margins, particularly when we're moving into gasoline season.
Brian Mandell: When we're thinking about crudes, whether we bring in Venezuela crude or some other crude, we're thinking about the cost of the crude, the crude type, the value of the products the crude makes, transportation costs, the specific refinery that the crude's going to. We have a lot of flexibility about what crudes we can run in all our refineries. We also have a strong commercial organization, and that allows us to redo the crude slate pretty quickly as the market dictates. That's also a help. I would also add one other final point that I haven't heard people talk about, which is the heavy naphtha. As more heavy naphtha is sent to the US Gulf Coast for blending Venezuelan crudes, it's likely to be a benefit to the gasoline margins, particularly when we're moving into gasoline season.
Speaker #3: And we have a lot of flexibility about what crudes we can run in all our refineries. We also have a strong commercial organization, and that allows us to redo the crude slate pretty quickly as the market dictated.
No, I appreciate the answers, guys. It was just a clarification, very quickly. I'm trying to understand if if this the physical Market is driven the the widening or the expectation of the physical Market or is this paper markets, you know, bidding it out in the future but the physical hasn't shown up yet. I'm trying to understand if it's already happening or if this is more speculative is driving. These Gap, the Gap out that we've seen around what is normally a winter spread on WCS?
I would say both.
Speaker #3: So that's also a help. But I would also add one other final point that I haven't heard people talk about, which is the heavy naphtha, as more heavy naphtha is sent to the US Gulf Coast for blending Venezuelan crudes.
the barrels are coming into the market, both in the domestic Market foreign markets and it's the expectation of continued barrels into the
Speaker #3: It's likely to be a benefit to the gasoline margins, particularly when we're moving into gasoline.
Speaker #6: Yeah, I appreciate the answers, guys. Maybe just a clarification very quickly. I'm trying to understand if the physical market is driving the widening, or the expectation of the physical market, or is this the paper markets bidding it out in the future, but the physical hasn't shown up yet?
Douglas Leggate: Yeah, I appreciate the answers, guys. Maybe just a clarification very quickly. I'm trying to understand if the physical market is driven the widening or the expectation of the physical market, or is this paper markets bidding it out in the future, but the physical hasn't shown up yet? I'm trying to understand if it's already happening or if this is more speculative that's driving the gap out that we've seen around what is normally a winter spread on WCS.
Douglas Leggate: Yeah, I appreciate the answers, guys. Maybe just a clarification very quickly. I'm trying to understand if the physical market is driven the widening or the expectation of the physical market, or is this paper markets bidding it out in the future, but the physical hasn't shown up yet? I'm trying to understand if it's already happening or if this is more speculative that's driving the gap out that we've seen around what is normally a winter spread on WCS.
Okay, thank you my quick. Follow-up. Mark is, is just on your comments about the final utilization. Obviously. Reliability was, um, in under the spotlight for, for quite a while. You guys have stepped up there and I think Neil already observed that in this question, I don't know. My my question is simply when we think about your run rate going forward, what would you have us? Think about the range of utilization that it's obviously moved up. What what should be thinking about as we go forward? Uh, sustainable utilization, right?
Yeah, all that rich.
So that he's got some good metrics there.
Speaker #6: I'm trying to understand if it's already happening, or if this is more speculative that's driving these gaps out that we've seen around what is normally a winter spread on WCS.
Speaker #3: I would say both. It's the barrels are coming into the market, both in the domestic market, foreign markets, and it's the expectation of continued barrels into the markets.
Brian Mandell: I would say both. It's the barrels are coming into the market, both in the domestic market, foreign markets, and it's the expectation of continued barrels into the markets.
Brian Mandell: I would say both. It's the barrels are coming into the market, both in the domestic market, foreign markets, and it's the expectation of continued barrels into the markets.
Speaker #6: Okay, thank you. My quick follow-up, Mark, is just on your comments about refinery utilization. Obviously, reliability was under the spotlight for quite a while.
Douglas Leggate: Okay. Thank you. My quick follow-up, Mark, is just on your comments about refinery utilization. Obviously, reliability was under the spotlight for quite a while. You guys have stepped up there, and I think Neil already observed that in his question. My question is simply, when we think about your run rate going forward, what would you have us think about the range of utilization? It's obviously moved up. What should we think about as we go forward sustainable utilization rate?
Douglas Leggate: Okay. Thank you. My quick follow-up, Mark, is just on your comments about refinery utilization. Obviously, reliability was under the spotlight for quite a while. You guys have stepped up there, and I think Neil already observed that in his question. My question is simply, when we think about your run rate going forward, what would you have us think about the range of utilization? It's obviously moved up. What should we think about as we go forward sustainable utilization rate?
Okay, so, uh utilization when you know, obviously we've we've been focused on enhancing our reliability in, in our, in our programs that underly, that continued long utilization. So utilization is really 2 things in my mind. 1 is the equipment has to be available to run.
Speaker #6: You guys have stepped up there, and I think Neil already observed that in his question. My question is simply, when we think about your run rate going forward, what would you have us think about the range of utilization?
Speaker #6: It's obviously moved up. What should we think about as we go forward—sustainable utilization rate?
Speaker #3: Yeah, all that risk tackle—that he's got some good metrics there. Okay. So, utilization—obviously, we've been focused on enhancing our reliability in our programs and underlying that continued long utilization.
Rich Harbison: Yeah, I'll let Rich tackle that. He's got some good metrics there. Okay. So utilization, obviously, we've been focused on enhancing our reliability in our programs that underlie that continued long utilization. So utilization is really two things in my mind. One is the equipment has to be available to run, and then the market needs to be there. So the market will be what it'll be. But when it comes to our ability to run, we're seeing some really good progress with these reliability programs, so much so we've actually even looked at our capacities as an organization and did some noodling on it. And we've concluded the fact that we've had some structural changes in four of our refineries. And you're going to see us release some increased capacities, and it may be even in the supplemental data on the presentation. But there's two primary reasons.
Rich Harbison: Yeah, I'll let Rich tackle that. He's got some good metrics there. Okay. So utilization, obviously, we've been focused on enhancing our reliability in our programs that underlie that continued long utilization. So utilization is really two things in my mind. One is the equipment has to be available to run, and then the market needs to be there. So the market will be what it'll be. But when it comes to our ability to run, we're seeing some really good progress with these reliability programs, so much so we've actually even looked at our capacities as an organization and did some noodling on it. And we've concluded the fact that we've had some structural changes in four of our refineries. And you're going to see us release some increased capacities, and it may be even in the supplemental data on the presentation. But there's two primary reasons.
is in uh demonstrated improved operating rates at 2 of the refineries and
Speaker #3: So, utilization is really two things in my mind. One is, the equipment has to be available to run. And then the market needs to be there.
Speaker #3: So, the market will be what it'll be. But when it comes to our ability to run, we're seeing some really good progress with these reliability programs. So much so, we've actually even looked at our capacities as an organization and did some noodling on it.
Projects that have been implemented at 2 other refineries. So at our Billings Refinery, we're going to move the capacity of that facility from historic 66,000. Barrel a day stated capacity to 71,000 barrels a day.
And at the Ponca City Refinery, we're going to move that from 217,000 barrels a day to 228,000 barrels a day.
Speaker #3: And we've concluded the fact that we've had some structural changes in four of our refineries. And you're going to see us release some increased capacities.
Speaker #3: And it may be even in the supplemental data on the presentation. But there are two primary reasons. One, that we're going to increase these capacities.
Rich Harbison: One that we're going to increase these capacities. One is demonstrated improved operating rates at two of the refineries and projects that have been implemented at two other refineries. So at our Billings refinery, we're going to move the capacity of that facility from historic 66,000 barrel a day stated capacity to 71,000 barrels a day. And at the Ponca City refinery, we're going to move that from 217,000 barrels a day to 228,000 barrels a day. And on the project side, we've talked about both of these projects. And I think in 2025, they were both commissioned and have both demonstrated their capability to meet the design parameters. So at the Bayway facility, we've talked about the Native VGO Project. That has also unlocked some crude capacity for us.
Rich Harbison: One that we're going to increase these capacities. One is demonstrated improved operating rates at two of the refineries and projects that have been implemented at two other refineries. So at our Billings refinery, we're going to move the capacity of that facility from historic 66,000 barrel a day stated capacity to 71,000 barrels a day. And at the Ponca City refinery, we're going to move that from 217,000 barrels a day to 228,000 barrels a day. And on the project side, we've talked about both of these projects. And I think in 2025, they were both commissioned and have both demonstrated their capability to meet the design parameters. So at the Bayway facility, we've talked about the Native VGO Project. That has also unlocked some crude capacity for us.
Speaker #3: One is demonstrated improved operating rates at two of the refineries, and projects that have been implemented at two other refineries. So at our Billings refinery, we're going to move the capacity of that facility from the historic 66,000 barrels a day stated capacity to 71,000 barrels a day.
And on the project side, we we've, we've talked about both of these projects and I think in 2025, they were both commissioned and have both demonstrated, uh, their capability to meet the design parameters. So, at the Bayway facility, we've talked about the vgo, the native vgo project that is also unlocked. Some crude capacity for us, and we're going to move the Bayway Refinery up to 275,000 barrels, a day capacity from 2508. And then the Sweeney Refinery from 277 to 265 related to the sour crude Flex project, which we've talked a lot about over the time.
Speaker #3: And at the Ponca City refinery, we're going to move that from 217,000 barrels a day to 228,000 barrels a day. And then on the project side, we've talked about both of these projects.
8555. So, so when we think about utilization, uh, and then as a factor of capacity, um, you could see us, uh,
Speaker #3: And I think in 2025, they were both commissioned and have both demonstrated their capability to meet the design parameters. So at the Bayway facility, we've talked about the VGO, the native VGO project.
Speaker #3: That is also on lock some crude capacity for us. And we're going to move the Bayway refinery up to 275,000 barrels a day capacity from 258,000.
Rich Harbison: We're going to move the Bayway refinery up to 275,000bbl/d capacity from 258,000, and then the Sweeny refinery from 277,000 to 265,000 related to the Sour Crude Flex project, which we've talked a lot about over the time. 25,000bbl/d increase in capacity across the system, about a 2% increase. When we think about utilization and then as a fact of capacity, you could see us using the equipment even at a higher level than what we have historically reported on. I would just add to that, Doug, that there's been a concerted effort around turnarounds. You've seen our turnarounds become more disciplined, and we're taking work out of the turnarounds. The work's still getting done, but we're finding creative ways to get it done outside of turnarounds. It shortens that duration and the financial impact.
Rich Harbison: We're going to move the Bayway refinery up to 275,000bbl/d capacity from 258,000, and then the Sweeny refinery from 277,000 to 265,000 related to the Sour Crude Flex project, which we've talked a lot about over the time. 25,000bbl/d increase in capacity across the system, about a 2% increase. When we think about utilization and then as a fact of capacity, you could see us using the equipment even at a higher level than what we have historically reported on. I would just add to that, Doug, that there's been a concerted effort around turnarounds. You've seen our turnarounds become more disciplined, and we're taking work out of the turnarounds. The work's still getting done, but we're finding creative ways to get it done outside of turnarounds. It shortens that duration and the financial impact.
Uh, using the equipment even at a higher level than what we have, historically reported on and, and I would just add to that, that there's been a been a concerted effort around turnarounds. You've seen our turnarounds become more disciplined and we're taking work out of turnarounds, and we're still getting done, but we're finding creative ways to get it done outside of turnaround. So it shortens that duration. And the, and the financial impact, and we've been using things like machine learning, uh, we we, uh, we
Speaker #3: And then the Sweeney refinery from 277 to 265 related to the Sour Crude Flex project, which we've talked a lot about over time.
Speaker #3: A 25,000-barrel-a-day increase in capacity across the system is about a 2% increase. So, when we think about utilization, and then as a factor of capacity, you could see us using the equipment even at a higher level than what we have historically reported on.
Speaker #3: A 25,000-barrel-a-day increase in capacity across the system is about a 2% increase. So, when we think about utilization as a factor of capacity, you could see us using the equipment even at a higher level than what we have historically reported.
We reduce the spend on turnarounds in our forecast, I believe mid year substantially, and I think we still be that throughout the year because we're getting better and better at using those tools, uh, to, uh, better Implement our turnarounds to manage the impact on on utilization. So that's, that's underlying some of that performance as well.
Speaker #2: And I would just add to that, there's been a concerted effort around turnarounds. You've seen our turnarounds become more disciplined, and we're taking work out of the turnarounds.
Well Mark, thanks so much for the answer. You're the reason we're having a panel of this exact Topic at our conference in a few weeks. So, thanks guys. Ready to follow to answer?
I appreciate that.
Speaker #2: And we're still getting it done, but we're finding creative ways to get it done outside of turnarounds. So it shortens that duration and the financial impact.
3. Now time to Lloyd burn with Jeff, your line is open, please go ahead.
Speaker #2: And we've been using things like machine learning. We reduced the spend on turnarounds in our forecast, I believe, mid-year substantially. And I think we still beat that throughout the year because we're getting better and better at using those tools to better implement our turnarounds to manage the impact on utilization.
Rich Harbison: We've been using things like machine learning. We reduced the spend on turnarounds in our forecast, I believe, mid-year, substantially. I think we still beat that throughout the year because we're getting better and better at using those tools to better implement our turnarounds to manage the impact on utilization. So that's underlying some of that performance as well.
Rich Harbison: We've been using things like machine learning. We reduced the spend on turnarounds in our forecast, I believe, mid-year, substantially. I think we still beat that throughout the year because we're getting better and better at using those tools to better implement our turnarounds to manage the impact on utilization. So that's underlying some of that performance as well.
Hey, good afternoon guys. Mark uh thank you for taking the questions. Maybe you guys could start with just an update on Western Gateway and
The Open Season and then any I know you guys are uh extending the destination to uh LA. But any hurdles next steps? You know. Where are you in permitting? All that stuff.
Speaker #2: So that's underlying some of that performance as well.
Douglas Leggate: Mark, thanks so much for the answer. You're the reason we're having a panel on this exact topic at our conference in a few weeks. So thanks, guys. Very thorough answer.
Douglas Leggate: Mark, thanks so much for the answer. You're the reason we're having a panel on this exact topic at our conference in a few weeks. So thanks, guys. Very thorough answer.
Speaker #6: Mark, thanks so much for the answer. You're the reason we're having a panel on this exact topic at our conference in a few weeks.
Speaker #6: So thanks, guys. Very thorough
Speaker #6: answer. I
Speaker #3: appreciate
Rich Harbison: I appreciate that.
Rich Harbison: I appreciate that.
Speaker #3: With that, we now turn to Lloyd.
Operator: We now turn to Lloyd Byrne with Jefferies. Your line is open. Please go ahead.
Operator: We now turn to Lloyd Byrne with Jefferies. Your line is open. Please go ahead.
Speaker #1: Burn with Jefferies. Your line is open. Please go ahead.
Speaker #1: ahead.
Speaker #7: Hey, good afternoon, guys. Mark, thank you for taking the questions. Maybe you guys could start with just an update on Western Gateway and the open season, and then any—I know you guys are extending the destination to LA—but any hurdles, next steps?
[Analyst] (Jefferies): Hey, good afternoon, guys, Mark. Thank you for taking the questions. Maybe you guys could start with just an update on Western Gateway and the open season. And then I know you guys are extending the destination to LA, but any hurdles, next steps? Where are you in permitting, all that stuff?
Lloyd Byrne: Hey, good afternoon, guys, Mark. Thank you for taking the questions. Maybe you guys could start with just an update on Western Gateway and the open season. And then I know you guys are extending the destination to LA, but any hurdles, next steps? Where are you in permitting, all that stuff?
Speaker #7: Where are you in permitting, all that stuff?
Speaker #3: Hey, Lloyd, this is Don Baldrich. I appreciate the question. Yeah, to unpack that a bit, we had a first open season positive response. We received multiple shipper commitments, which really gives us a solid base of volume.
Don Baldridge: Hey, Lloyd. This is Don Baldridge. I appreciate the question. Yeah, to unpack that a bit, we had a first open season, positive response. We received multiple shipper commitments, which really gives us a solid base of volume and some certainty there. And as you've mentioned, what we're doing now in this second open season, it's really an extension as opposed to an expansion instead of an extension. Because what we've done is we've expanded the delivery points all the way into the California market, specifically the LA market, which is really the heart there of California demand. That plus being able to reach back into the Gulf Coast, where we have made arrangements to be able to pull product in from the Gulf Coast through the Explorer Pipeline to reach the Western Gateway Pipeline. And as you know, we're a 22% owner of Explorer, so there's some benefit there.
Donald J. Baldridge: Hey, Lloyd. This is Don Baldridge. I appreciate the question. Yeah, to unpack that a bit, we had a first open season, positive response. We received multiple shipper commitments, which really gives us a solid base of volume and some certainty there. And as you've mentioned, what we're doing now in this second open season, it's really an extension as opposed to an expansion instead of an extension. Because what we've done is we've expanded the delivery points all the way into the California market, specifically the LA market, which is really the heart there of California demand. That plus being able to reach back into the Gulf Coast, where we have made arrangements to be able to pull product in from the Gulf Coast through the Explorer Pipeline to reach the Western Gateway Pipeline. And as you know, we're a 22% owner of Explorer, so there's some benefit there.
Hey Lloyd. This is Don Baldridge. I appreciate the question. Um, yeah to unpack that a bit. We had a first Open Season positive response. We received multiple shipper commitments, which, you know, really gives us a, a solid base of volume and some certainty there. And what we, what as you mentioned, what we were doing now, in this second Open Season. It's it's really an extension as opposed as opposed to our expansion is in instead of an extension because what we've done is we've expanded the delivery points all the way into the California Market. Specifically the LA Market, which is really the heart. There of California demand, um, that plus being able to reach back into the Gulf Coast where we have uh, made arrangements to be able to pull the product in from the Gulf Coast to the Explorer pipeline to reach the the Western Gateway path. As as, you know, we're at 22% owner Explorer. So there's some benefit there. And so, you're now prospective customers. They
Speaker #3: And some certainty there. And, as you've mentioned, what we are doing now in this second open season—it's really an extension as opposed to an expansion.
Speaker #3: Instead of an extension, because what we've done is we've expanded the delivery points all the way into the California market, specifically the LA market, which is really the heart there of California demand.
Speaker #3: That, plus being able to reach back into the Gulf Coast, where we have made arrangements to be able to pull product in from the Gulf Coast through the Explorer Pipeline to reach the Western Gateway path.
Speaker #3: As you know, we're at 22% owner of Explorer. So there's some benefit there. And so now, perspective customers, they really have the ability to reach a very liquid demand center in the LA market, be able to reach back to supply origins, both in the mid-continent as well as the Gulf Coast.
Don Baldridge: And so now prospective customers, they really have the ability to reach a very liquid demand center in the LA market, be able to reach back to supply origins, both in the Midcontinent as well as the Gulf Coast. We think that is really a compelling offer. That's what this second open season is primarily focused on. And what I'd emphasize for you is that liquidity. That's really, I think, what's going to help drive additional interest in this project. Like I said, we received commitments in the first open season. We're expected to get additional commitments for this path that would really be the Gulf Coast, Midcontinent to LA. The feedback's been positive.
Donald J. Baldridge: And so now prospective customers, they really have the ability to reach a very liquid demand center in the LA market, be able to reach back to supply origins, both in the Midcontinent as well as the Gulf Coast. We think that is really a compelling offer. That's what this second open season is primarily focused on. And what I'd emphasize for you is that liquidity. That's really, I think, what's going to help drive additional interest in this project. Like I said, we received commitments in the first open season. We're expected to get additional commitments for this path that would really be the Gulf Coast, Midcontinent to LA. The feedback's been positive.
Speaker #3: We think that is really a compelling offer. That's what this second open season is primarily focused on. And what I'd emphasize for you is that liquidity—that's really, I think, what's going to help drive additional interest in this project.
Speaker #3: Like I said, we received commitments in the first open season. We're expected to get additional commitments for this path that would really be the Gulf Coast, mid-continent to LA.
Speaker #3: The feedback's been positive. I think the folks that we are actively engaged with along this project see the market developing a lot like we do, where the West Coast begins to look a lot like the East Coast, where you have it supplied by a few refineries.
Don Baldridge: I think the folks that we are actively engaged with along this project see the market developing a lot like we do, where the West Coast begins to look a lot like the East Coast, where it's supplied by a few refineries, some imports that are waterborne, and then you have a pipeline which delivers really competitively priced, attractive, reliable American-produced fuel to that market. So that's what we think is really exciting about this. We're obviously actively working through the scoping and design phase and feel real confident in terms of the ability to execute. It's really right now securing third-party supply commitments with the right contract terms and such to give us the right returns to be able to execute the project.
Donald J. Baldridge: I think the folks that we are actively engaged with along this project see the market developing a lot like we do, where the West Coast begins to look a lot like the East Coast, where it's supplied by a few refineries, some imports that are waterborne, and then you have a pipeline which delivers really competitively priced, attractive, reliable American-produced fuel to that market. So that's what we think is really exciting about this. We're obviously actively working through the scoping and design phase and feel real confident in terms of the ability to execute. It's really right now securing third-party supply commitments with the right contract terms and such to give us the right returns to be able to execute the project.
Where you have its supplied by a few refineries some imports that are water-borne and then you have a pipeline which delivers really competitively, priced attractive, uh, reliable American produced fuel, uh, to that market. So that's, uh, that's what we think is is, uh, really exciting about this. We're obviously actively, uh, working through the scoping and, and design phase, um, and feel real confident in terms of the ability to execute, it's really right now, uh, securing third-party Supply, commitments, uh, with the right contract terms, and, and such to, uh, give us the the right returns to be able to execute the project.
That's great. And this the support from the states, it's been pretty good.
Speaker #3: Some imports that are waterborne, and then you have a pipeline which delivers really competitively priced, attractive, reliable, American-produced fuel to that market. So that's what we think is really exciting about this.
Speaker #3: We're obviously actively working through the scoping and design phase and feel real confident in terms of the ability to execute. It's really, right now, securing third-party supply commitments with the right contract terms and such to give us the right returns to be able to execute the project.
Um, and I've been in the pipeline business for most of my career but to have, uh, the amount of uh, support from a regulatory folks elected to folks, both state and federal. Uh, this 1 is is a first to have that type of uh just kind of uni unilateral uh support and understanding for uh this type of project, the design, the capacity, the timing. All of it makes uh a lot of sense to to most of the folks that we talked to
Speaker #7: That's great. And the support from the state's been pretty good?
[Analyst] (Jefferies): That's great. And the support from the state's been pretty good?
Lloyd Byrne: That's great. And the support from the state's been pretty good?
Speaker #3: Yes. I mean, from my experience, this is one unique project. I've been in the pipeline business for most of my career, but to have the amount of support from regulatory folks, elected folks—both state and federal—this one is a first to have that type of just kind of unilateral support and understanding for this type of project. The design, the capacity, the timing, all of it makes a lot of sense to most of the folks that we talk to.
Don Baldridge: Yes. I mean, from my experience, this is one of a unique project. I've been in the pipeline business for most of my career. But to have the amount of support from regulatory folks, elected folks, both state and federal, this one is a first to have that type of just kind of unilateral support and understanding for this type of project. The design, the capacity, the timing, all of it makes a lot of sense to most of the folks that we talk to.
Donald J. Baldridge: Yes. I mean, from my experience, this is one of a unique project. I've been in the pipeline business for most of my career. But to have the amount of support from regulatory folks, elected folks, both state and federal, this one is a first to have that type of just kind of unilateral support and understanding for this type of project. The design, the capacity, the timing, all of it makes a lot of sense to most of the folks that we talk to.
That's awesome. Thank you, Don a quick follow-up. I think to uh maybe Steve's question. Um, clean product yields have been uh, really strong and just the sustainability of that, the the Catalyst optimization, and then whether uh Central Corridor uh will help with respect to uh those yields going forward.
Speaker #3: to. That's
Speaker #7: Awesome. Thank you, Don. And a quick follow-up, I think, to maybe Steve's question. Clean product yields have been really strong, and just the sustainability of that, the catalyst optimization, and then whether Central Corridor will help with respect to those yields going forward.
[Analyst] (Jefferies): That's awesome. Thank you, Don. A quick follow-up, I think, to maybe Steve's question. Clean product yields have been really strong. And just the sustainability of that, the catalyst optimization, and then whether Central Corridor will help with respect to those yields going forward.
Lloyd Byrne: That's awesome. Thank you, Don. A quick follow-up, I think, to maybe Steve's question. Clean product yields have been really strong. And just the sustainability of that, the catalyst optimization, and then whether Central Corridor will help with respect to those yields going forward.
Speaker #3: Yeah, this is Rich. Thanks. It's been a real focus for us. We just talked a little bit about utilization and capacity, and that's really focused on the front end, the crude side of the business.
Rich Harbison: Yeah, this is Rich. Thanks. It's been a real focus for us. We just talked a little bit about utilization and capacity, and that's really focused on the front end, the crude side of the business. The utilization and clean product yields component of that is a continued now focus for us. We've taken time to evaluate every key unit that we have in our system. We're using the discipline that we used for the crude unit utilization part of the business and applying that discipline now to all the downstream units that we have. What you're seeing is the results of this effort starting to creep into the numbers here. You see it in the clean product yield component of that.
Rich Harbison: Yeah, this is Rich. Thanks. It's been a real focus for us. We just talked a little bit about utilization and capacity, and that's really focused on the front end, the crude side of the business. The utilization and clean product yields component of that is a continued now focus for us. We've taken time to evaluate every key unit that we have in our system. We're using the discipline that we used for the crude unit utilization part of the business and applying that discipline now to all the downstream units that we have. What you're seeing is the results of this effort starting to creep into the numbers here. You see it in the clean product yield component of that.
Yeah, this Rich. Um thanks you know, that's it's been a it's been a real Focus for us, you know, we we we just talked a little bit about utilization and capacity and that's really focused on the front end. The crude crude side of the business. The utilization and clean product yields component of that is, is a continued now, Focus for us. And we've we've taken time to evaluate every key unit that we have, uh, in our system and we're using the discipline that we used for the crude unit utilization, part of the business. And applying that discipline, now, to all the downstream units that we have, and what you're seeing is, is the results of this effort starting to creep into the numbers here and you'll you, you see it in the clean product. Yield component of that. We had a record year this year annually for clean product yield, which is, which is not an easy thing to achieve and a and a system is as large as ours, but it's what it is, is each
Speaker #3: The utilization and clean product yields component of that is a continued, now, focus for us. And we've taken time to evaluate every key unit that we have in our system.
Speaker #3: And we're using the discipline that we used for the crude unit utilization part of the business, and applying that discipline now to all the downstream units that we have.
Speaker #3: And what you're seeing is the results of this effort starting to creep into the numbers here. And you see it in the clean product yield component of that.
Organization is taking detailed, look at every 1 of these conversion units and making sure that we are converting to the highest product value that we can. So I, I, I feel it's structural, it's a structural change in our business. And, and I see it as very sustainable. And I also see it as we're going to make you're going to see continued progress on this as, as we move forward here, part of it driven by the organization's performance. The other part, driven by our smart small Capital uh High return investment opportunities.
Great. Thank you guys.
Speaker #3: We had a record year this year, annually, for clean product yield, which is not an easy thing to achieve in a system as large as ours.
Rich Harbison: We had a record year this year annually for clean product yield, which is not an easy thing to achieve in a system as large as ours. But what it is, is each organization is taking a detailed look at every one of these conversion units and making sure that we are converting to the highest product value that we can. So I feel it's structural. It's a structural change in our business, and I see it as very sustainable. And I also see it as we're going to you're going to see continued progress on this as we move forward here, part of it driven by the organization's performance, the other part driven by our small capital, high-return investment opportunities.
Rich Harbison: We had a record year this year annually for clean product yield, which is not an easy thing to achieve in a system as large as ours. But what it is, is each organization is taking a detailed look at every one of these conversion units and making sure that we are converting to the highest product value that we can. So I feel it's structural. It's a structural change in our business, and I see it as very sustainable. And I also see it as we're going to you're going to see continued progress on this as we move forward here, part of it driven by the organization's performance, the other part driven by our small capital, high-return investment opportunities.
We now send to manav Gupta with UBS. Your line is open. Please go ahead.
Speaker #3: But what it is, is each organization is taking a detailed look at every one of these conversion units and making sure that we are converting to the highest product value that we can.
Speaker #3: So I feel it's structural. It's a structural change in our business. And I see it as very sustainable. And I also see it as we're going to make you're going to see continued progress on this as we move forward here.
Congrats on a lot of positive developments including that Debt Pay down and cost reductions. My question here is when we look at the Midstream earnings, you can let me know if I'm wrong but I think you've almost doubled them in the last 2 years. So how should we think about the Midstream portfolio going away? It should be assumed like the organic 5% or 7% or something like mid single digit organic growth in Midstream and a possibility of good bolt-on deals if they come along like help us understand the growth path from Midstream from here on.
Speaker #3: Part of it is driven by the organization's performance. The other part is driven by our small-capital, high-return investment opportunities.
Speaker #7: Great. Thank you.
[Analyst] (Jefferies): Great. Thank you, guys.
Lloyd Byrne: Great. Thank you, guys.
Speaker #1: We now turn to Manav Gupta with UBS. Your line is open. Please go ahead.
Operator: We now turn to Manav Gupta with UBS. Your line is open. Please go ahead.
Operator: We now turn to Manav Gupta with UBS. Your line is open. Please go ahead.
Speaker #8: Congrats on a lot of positive developments, including the debt paydown and cost reductions. My question here is, when we look at the midstream earnings—you can let me know if I'm wrong—but I think you've almost doubled them in the last two years.
Manav Gupta: Congrats on a lot of positive developments, including that debt paydown and cost reductions. My question here is, when we look at the midstream earnings, you can let me know if I'm wrong, but I think you've almost doubled them in the last two years. So how should we think about the midstream portfolio going ahead? Should we assume an organic 5% or something like mid-single digit organic growth in midstream and a possibility of good bolt-on deals if they come along? Help us understand the growth path for midstream from here on.
Manav Gupta: Congrats on a lot of positive developments, including that debt paydown and cost reductions. My question here is, when we look at the midstream earnings, you can let me know if I'm wrong, but I think you've almost doubled them in the last two years. So how should we think about the midstream portfolio going ahead? Should we assume an organic 5% or something like mid-single digit organic growth in midstream and a possibility of good bolt-on deals if they come along? Help us understand the growth path for midstream from here on.
Yeah, this is Mark you're absolutely right. You've seen that kind of growth in our earnings. There have been a number of things that historically factored into that certainly organic. Uh but uh I think really the the big upside has been the inorganic things that we acquired that opened up a larger organic playing field. So you've seen that with those Picos, you've seen that with Coastal Bend and uh and we'll continue to look for opportunities like that but the current Focus to get us to that 4 and a half is organic opportunities and and Don can walk you through what that looks like going forward.
Speaker #8: So, how should we think about the midstream portfolio going away? Should we assume an organic 5% or 7%, or something like mid-single-digit organic growth in midstream?
Speaker #8: And a possibility of good bolt-on deals if they come along. Like, help us understand the growth path for Midstream from here on.
Speaker #3: Yeah, Manav, this is Mark. You're absolutely right. You've seen that kind of growth in our earnings. There have been a number of things that historically have factored into that.
Rich Harbison: Yeah, Manav, this is Mark. You're absolutely right. You've seen that kind of growth in our earnings. There have been a number of things that historically have factored into that, certainly organic. But I think really the big upside has been the inorganic things that we acquired that opened up a larger organic playing field. So you've seen that with those Picos. You've seen that with Coastal Bend. And we'll continue to look for opportunities like that. But the current focus to get us to that 4.5 is organic opportunities. And Don can walk you through what that looks like going forward.
Rich Harbison: Yeah, Manav, this is Mark. You're absolutely right. You've seen that kind of growth in our earnings. There have been a number of things that historically have factored into that, certainly organic. But I think really the big upside has been the inorganic things that we acquired that opened up a larger organic playing field. So you've seen that with those Picos. You've seen that with Coastal Bend. And we'll continue to look for opportunities like that. But the current focus to get us to that 4.5 is organic opportunities. And Don can walk you through what that looks like going forward.
Speaker #3: Certainly, organic, but I think really the big upside has been the inorganic things that we acquired that opened up a larger organic playing field.
Speaker #3: So you've seen that with those PICOs. You've seen that with Coastal Bend, and we'll continue to look for opportunities like that. But the current focus to get us to that $4.5 is organic opportunities.
Speaker #3: And Don can walk you through what that looks like going forward. Yeah, Manav, I can just say I think we are right where I expected us to be from a run-rate EBITDA, right around that $1 billion.
Don Baldridge: Yeah, Manav, I can just say I think we are right where I expected us to be from a run rate EBITDA right around that $1 billion. And maybe to kind of unpack how that looks over the next couple of years, I expect us to be about this $1 billion run rate. We'll have some quarter-to-quarter variability, a bit with commodity prices that are sensitive in our G&P business to what the realized prices are, as well as just our contract and volume mix when we factor in fee escalations, recontracting, spot rates, and such. And the real step changes will be these organic growth projects that we have been talking about. And when those come online and fill up here in the latter part of 2026 and into 2027, those will be the big earning contributors.
Donald J. Baldridge: Yeah, Manav, I can just say I think we are right where I expected us to be from a run rate EBITDA right around that $1 billion. And maybe to kind of unpack how that looks over the next couple of years, I expect us to be about this $1 billion run rate. We'll have some quarter-to-quarter variability, a bit with commodity prices that are sensitive in our G&P business to what the realized prices are, as well as just our contract and volume mix when we factor in fee escalations, recontracting, spot rates, and such. And the real step changes will be these organic growth projects that we have been talking about. And when those come online and fill up here in the latter part of 2026 and into 2027, those will be the big earning contributors.
Speaker #3: And maybe to kind of unpack how that looks over the next couple of years, I expect us to be about this $1 billion run rate.
And and maybe just kind of unpack how that looks, uh, over the next couple of years, I expect this to be about this billion dollar, uh, run rate. We'll have some, you know, quarter to quarter variability a bit with um, commodity prices that are, you know, sensitive in our GMP business. So what the realized prices are as well as, you know, just our contract and volume mix, uh, when that we factor in fee escalations, and, uh, recontracting and and spot rates and such, and the real step changes will be these organic growth projects that we have been talking about. And when those come online and fill up here, the latter part of 26 and into 27, those will be the big earning contributors. That's what really takes us to that 4 and a half billion dollar uh run rate by the end of 27 and and what I'd highlight for you and I think you you you heard it a bit from Mark is is the momentum that we have within our Midstream business? As you know, I came in, uh, from the DCP acquisition and I can tell you, we are a much different
Speaker #3: We'll have some quarter-to-quarter variability, a bit, with commodity prices that are sensitive in our GNP business—so what the realized prices are, as well as just our contract and volume mix when we factor in fee escalations, recontracting, and spot rates, etc.
Speaker #3: And the real step changes will be these organic growth projects that we have been talking about. When those come online and fill up here in the latter part of '26 and into '27, those will be the big earning contributors.
Different Midstream business today than we were just a few years ago because of the platform that we've built like, Mark mentioned, some of these Acquisitions putting this platform together, we are a dramatically better Midstream company. We have, um, you know, really great response from our customers, they see the breadth and the quality of the service, and the reliability that we are executing on. So we're getting a lot more deal flow. We we see that as, uh, what really gives me a lot of confidence in hitting our Target.
Speaker #3: That's what we're really taking us to that $4.5 billion run rate by the end of '27. And what I'd highlight for you—and I think you heard it a bit from Mark—is the momentum that we have within our midstream business.
Don Baldridge: That's what really takes us to that $4.5 billion run rate by the end of 2027. What I'd highlight for you, and I think you heard it a bit from Mark, is the momentum that we have within our midstream business. As you know, I came in from the DCP acquisition. I can tell you, we are a much different midstream business today than we were just a few years ago because of the platform that we've built. Like Mark mentioned, some of these acquisitions, putting this platform together, we are a dramatically better midstream company. We have really great response from our customers. They see the breadth, the quality of the service, and the reliability that we are executing on. So we're getting a lot more deal flow.
Donald J. Baldridge: That's what really takes us to that $4.5 billion run rate by the end of 2027. What I'd highlight for you, and I think you heard it a bit from Mark, is the momentum that we have within our midstream business. As you know, I came in from the DCP acquisition. I can tell you, we are a much different midstream business today than we were just a few years ago because of the platform that we've built. Like Mark mentioned, some of these acquisitions, putting this platform together, we are a dramatically better midstream company. We have really great response from our customers. They see the breadth, the quality of the service, and the reliability that we are executing on. So we're getting a lot more deal flow.
Speaker #3: As you know, I came in from the DCP acquisition, and I can tell you we are a much different midstream business today than we were just a few years ago because of the platform that we've built.
Speaker #3: Like Mark mentioned, some of these acquisitions—putting this platform together—we are a dramatically better midstream company. We have really great response from our customers.
At that point and a half billion by the end of 27. We also you're seeing the deal pipeline fill up for things past 27 like a potential expansion of Corpus Christi Frac. Um like the Western Gateway and those types of uh projects that are starting to come to fruition. In our in our deal pipeline that gives me a lot of confidence that this is a sustainable growth rate of that mid single digits. Not only the 27. Uh, but but but well beyond 27.
Speaker #3: They see the breadth and the quality of the service, and the reliability that we are executing on. So we're getting a lot more deal flow.
Speaker #3: We see that as what really gives me a lot of confidence in hitting our target at that $4.5 billion by the end of '27.
Don Baldridge: We see that as what really gives me a lot of confidence in hitting our target at that $4.5 billion by end of 2027. You're seeing the deal pipeline fill up for things past 2027, like a potential expansion of Corpus Christi's frac, like the Western Gateway. It's those types of projects that are starting to come to fruition in our deal pipeline that gives me a lot of confidence that this is a sustainable growth rate of that mid-single digit, not only to 2027, but well beyond 2027.
Donald J. Baldridge: We see that as what really gives me a lot of confidence in hitting our target at that $4.5 billion by end of 2027. You're seeing the deal pipeline fill up for things past 2027, like a potential expansion of Corpus Christi's frac, like the Western Gateway. It's those types of projects that are starting to come to fruition in our deal pipeline that gives me a lot of confidence that this is a sustainable growth rate of that mid-single digit, not only to 2027, but well beyond 2027.
Speaker #3: We also, you're seeing the deal pipeline fill up for things past '27, like a potential expansion of Corpus Christi's FRAC, like the Western Gateway, as those types of projects are starting to come to fruition in our deal pipeline. That gives me a lot of confidence that this is a sustainable growth rate of that mid-single digits.
Well, thanks. So my quick, follow-up here is a little bit on the refining macro and we started 2025 with a very bearish Outlook and things improved and refiners massively outperformed, SNB in 2025. Now you're starting 26th with a very similar sentiment where for some reason, people are overly bearish on refining, but the way the setup is looking, it's still looking pretty constructive to us and year to date. Refiners have again massively outperformed SNP. Uh, you have definitely outperformed SNP. I'm just trying to understand what's your refining, macro Outlook, and do you believe that you could have another good year in 2026 as we did in 2025?
Speaker #3: Not only to '27, but well beyond '27.
Speaker #1: Perfect. So my quick follow-up here is a little bit on the refining macro. We started 2025 with a very bearish outlook, and things improved.
Manav Gupta: Perfect. So my quick follow-up here is a little bit on the refining macro. We started 2025 with a very bearish outlook, and things improved. Refiners massively outperformed S&P in 2025. Now, you're starting 2026 with a very similar sentiment. For some reason, people are overly bearish on refining. But the way the setup is looking, it's still looking pretty constructive to us. Year to date, refiners have, again, massively outperformed S&P. You have definitely outperformed S&P. I'm just trying to understand what's your refining macro outlook, and do you believe that we could have another good year in 2026 as we did in 2025?
Manav Gupta: Perfect. So my quick follow-up here is a little bit on the refining macro. We started 2025 with a very bearish outlook, and things improved. Refiners massively outperformed S&P in 2025. Now, you're starting 2026 with a very similar sentiment. For some reason, people are overly bearish on refining. But the way the setup is looking, it's still looking pretty constructive to us. Year to date, refiners have, again, massively outperformed S&P. You have definitely outperformed S&P. I'm just trying to understand what's your refining macro outlook, and do you believe that we could have another good year in 2026 as we did in 2025?
Speaker #1: And refiners massively outperformed the S&P in 2025. Now, you're starting '26 with a very similar sentiment. But for some reason, people are overly bearish on refining.
Speaker #1: But the way the setup is looking, it's still looking pretty constructive to us. And year to date, refiners have again massively outperformed the S&P. You have definitely outperformed the S&P.
Yeah, I we couldn't agree with you more manav. We, we, we are very bullish. If you look toward the start of spring turnarounds, we believe the refining system will have trouble. Keeping up with demand, first demand continues to keep growing in 2026. And if you look at global net, Refinery editions, they are less than Global demand growth. We also see new Refinery bills, uh, waited to the very end of the year and they'll probably slip into 2027. Second, we had very low unplanned turnarounds in 2025 and it'd be hard for unplanned outages for the US refining system to be much lower particularly with as you point out that recent High utilization. So a couple this with the widening of the heavy diffs and the benefit of that to our system and we are very constructive margins for the year.
Speaker #1: I'm just trying to understand, what's your refining macro outlook, and do you believe that we could have another good year in 2026 as we did in 2025?
Thank you so much.
Speaker #3: Yeah, we couldn't agree with you more, Manav. We are very bullish. If you look toward the start of spring turnarounds, we believe the refining system will have trouble keeping up with demand.
Rich Harbison: Yeah, we couldn't agree with you more, Manav. We are very bullish. If you look toward the start of spring turnarounds, we believe the refining system will have trouble keeping up with demand. First, demand continues to keep growing in 2026. If you look at global net refinery additions, they are less than global demand growth. We also see new refinery builds weighted to the very end of the year, and they'll probably slip into 2027. Second, we had very low unplanned turnarounds in 2025, and it'd be hard for unplanned outages for the US refining system to be much lower, particularly with, as you point out, that recent high utilization. So couple this with the widening of the heavy diffs and the benefit of that to our system, and we are very constructive margins for the year.
Rich Harbison: Yeah, we couldn't agree with you more, Manav. We are very bullish. If you look toward the start of spring turnarounds, we believe the refining system will have trouble keeping up with demand. First, demand continues to keep growing in 2026. If you look at global net refinery additions, they are less than global demand growth. We also see new refinery builds weighted to the very end of the year, and they'll probably slip into 2027. Second, we had very low unplanned turnarounds in 2025, and it'd be hard for unplanned outages for the US refining system to be much lower, particularly with, as you point out, that recent high utilization. So couple this with the widening of the heavy diffs and the benefit of that to our system, and we are very constructive margins for the year.
To Chan with Barclays, your line is open, please go ahead.
Speaker #3: First, demand continues to keep growing in 2026. And if you look at global net refinery additions, they are less than global demand growth. We also see new refinery builds weighted to the very end of the year, and they'll probably slip into 2027.
Speaker #3: Second, we had very low unplanned turnarounds in 2025, and it'd be hard for unplanned outages for the U.S. refining system to be much lower, particularly with, as you point out, that recent high utilization.
Speaker #3: So a couple of this, with the widening of the heavy diffs and the benefit of that to our system. And we are very constructive margins for the year.
Hi um on the Midstream front. How do you view the likelihood of increased ethane projection in the puran? Following the startup of multiple residue gas pipe lines in the second half of 2026 and Beyond. Um what implications could that have for your NGL volumes and margin realizations over time and giving your integrated strategy on translating this potential development to the chemical side? If Gulf Coast ethane availability, tightens could incremental Upstream rejection, ultimately
Affect the feedback and Vantage for G Coast crackers.
Speaker #1: Thank you so much. We now turn to Theresa Chen with Barclays. Your line is open. Please go ahead.
Manav Gupta: Thank you so much.
Manav Gupta: Thank you so much.
Operator: We now turn to Theresa Chen with Barclays. Your line is open. Please go ahead.
Operator: We now turn to Theresa Chen with Barclays. Your line is open. Please go ahead.
Speaker #9: Hi. On the midstream front, how do you view the likelihood of increased ethane rejection into the Permian following the startup of multiple residue gas pipelines in the second half of 2026 and beyond?
Theresa Chen: Hi. On the midstream front, how do you view the likelihood of increased ethane production in the Permian following the startup of multiple residue gas pipelines in the second half of 2026 and beyond? What implications could that have for your NGL volumes and margin realizations over time? And given your integrated strategy translating this potential development to the chemical side, if Gulf Coast ethane availability tightens, could incremental upstream rejection ultimately affect the feedstock advantage for Gulf Coast crackers?
Theresa Chen: Hi. On the midstream front, how do you view the likelihood of increased ethane production in the Permian following the startup of multiple residue gas pipelines in the second half of 2026 and beyond? What implications could that have for your NGL volumes and margin realizations over time? And given your integrated strategy translating this potential development to the chemical side, if Gulf Coast ethane availability tightens, could incremental upstream rejection ultimately affect the feedstock advantage for Gulf Coast crackers?
Speaker #9: What implications could that have for your NGL volumes and margin realizations over time? And, given your integrated strategy, translating this potential development to the chemical side, if both post-ethane availability tightens, could incremental upstream rejection ultimately affect the feedstock advantage for the Gulf Coast?
We turn on the Golden Triangle project and uh 20 207 when it really starts commissioning and and has that flow. Um,
Speaker #9: crackers? Hi, Theresa.
Don Baldridge: Hi, Theresa. This is Don. I think our view on when you think about the dynamics in the Permian with more gas pipelines coming on, our view is that ethane will have to continue to get priced so that sufficient recoveries are there to feed the demand in the Gulf Coast. And so we don't see a material change in rejection recovery in the Permian with the new gas pipelines coming on. Obviously, through our CP Kim ownership, we've got some big demand coming on from an ethane standpoint as we turn on the Golden Triangle project in 2027 when it really starts commissioning and has that flow. And so I think we see this as continuing to balance out. As gas prices rally, you might see some ethane, obviously, priced with that so it stays in recovery. But that's pretty much how I see it.
Donald J. Baldridge: Hi, Theresa. This is Don. I think our view on when you think about the dynamics in the Permian with more gas pipelines coming on, our view is that ethane will have to continue to get priced so that sufficient recoveries are there to feed the demand in the Gulf Coast. And so we don't see a material change in rejection recovery in the Permian with the new gas pipelines coming on. Obviously, through our CP Kim ownership, we've got some big demand coming on from an ethane standpoint as we turn on the Golden Triangle project in 2027 when it really starts commissioning and has that flow. And so I think we see this as continuing to balance out. As gas prices rally, you might see some ethane, obviously, priced with that so it stays in recovery. But that's pretty much how I see it.
Speaker #3: This is Don. I think our view on, when you think about the dynamics in the Permian, with more gas pipelines coming on, our view is that the ethane will have to continue to get priced so that a sufficient recovery is there to feed the demand in the Gulf Coast.
And so I I think we see this as continuing to balance out as gas prices uh rally you might see some some ethane obviously price with that so it stays in recovery but that's that's pretty much how I see it.
Thank you.
Speaker #3: And so we don't see a material change in rejection recovery in the Permian with the new gas pipelines coming on. Obviously, through our CP Chem ownership, we've got some big demand coming on from an ethane standpoint as we turn on the Golden Triangle project in '27, when it really starts commissioning and has that flow.
We now turn to poll Chang with Scotia Bank. Your line is open. Please go ahead.
Hey guys. Good morning. Um,
Speaker #3: And so, I think we see this as continuing to balance out. As gas prices rally, you might see some ethane, obviously, price with that.
I, I think this is the first 1, um, maybe it's for months, uh, you guys have done a lot in improving your refining operation. So end of this Pawn, uh, with your house is gradually, I think getting into the shape that you want. Do you believe, uh, you could be a good consolidator, uh, in the refunding, the industry.
Speaker #3: So it stays in recovery, but that's pretty much how I see it.
Speaker #3: it. Thank
Speaker #9: you.
Theresa Chen: Thank you.
Theresa Chen: Thank you.
And do you have the desire to do it? If there's a, a good, uh, we finding out that that or that, okay, we finding out that is available that you may be able to add to the system and be able to enhance. Uh so what kind of criteria you may be looking at?
Speaker #1: We now turn to Paul Cheng with Scotiabank. Your line is open. Please go ahead.
Operator: We now turn to Paul Cheng with Scotiabank. Your line is open. Please go ahead.
Operator: We now turn to Paul Cheng with Scotiabank. Your line is open. Please go ahead.
Speaker #10: Hey, guys. Good morning. I think this first one maybe is for Mark. You guys have done a lot in improving your refining operation.
Paul Cheng: Hey, guys. Good morning. I think this is the first one, maybe it's for Mark. You guys have done a lot in improving your refining operation. So as of this point, with your houses gradually, I think, getting into the shape that you want, do you believe you could be a good consolidator in the refining industry? And do you have the desire to do it if there's a good refining asset or that okay refining asset is available that you may be able to add to the system and be able to enhance? So what kind of criteria you may be looking at? Secondly, if we look at your heavy oil, I assume that in Q1, you're going to run more heavy oil given the discount.
Paul Cheng: Hey, guys. Good morning. I think this is the first one, maybe it's for Mark. You guys have done a lot in improving your refining operation. So as of this point, with your houses gradually, I think, getting into the shape that you want, do you believe you could be a good consolidator in the refining industry? And do you have the desire to do it if there's a good refining asset or that okay refining asset is available that you may be able to add to the system and be able to enhance? So what kind of criteria you may be looking at? Secondly, if we look at your heavy oil, I assume that in Q1, you're going to run more heavy oil given the discount.
Speaker #10: So, at this point, with your houses gradually, I think, getting into the shape that you want, do you believe you could be a good consolidator in the refining industry?
Speaker #10: And do you have a good refining asset or an okay refining asset that's available, that you may be able to add to the system and be able to enhance?
Um, secondly, that uh, if we look at, um, your heavier oil, I assume that in the first quarter, you're going to run more heavy oil given the uh, discount. So yes. The first quarter that you are already maxing out that capability or that uh, you actually think, uh, you still have excess capacity uh for the remaining of the year, uh, comparing to the first quarter level. And as you increase your heavy oil processing uh with that in any shape or form impact uh your light product yield uh as well as your overall full foot level. Thank you.
Speaker #10: So, what kind of criteria may you be looking at? Secondly, if we look at your heavy oil, I assume that in the first quarter, you're going to run more heavy oil.
Speaker #10: Given the discount, so is the first quarter that you are already maxing out that capability, or do you actually think you still have excess capacity for the remainder of the year compared to the first quarter level?
Paul Cheng: So is Q1 that you are already maxing out that capability, or that you actually think you still have excess capacity for the remaining of the year compared to the Q1 level? And as you increase your heavy oil processing, will that in any shape or form impact your light product yield as well as your overall footprint level? Thank you.
Paul Cheng: So is Q1 that you are already maxing out that capability, or that you actually think you still have excess capacity for the remaining of the year compared to the Q1 level? And as you increase your heavy oil processing, will that in any shape or form impact your light product yield as well as your overall footprint level? Thank you.
Speaker #10: And as you increase your heavy oil processing, will that in any shape or form impact your light product yield as well as your overall throughput level?
Yeah, Paul, I'll add to your second question first and uh, maybe invite others to, to pile on, but we we are maxed out, uh, heavy. We are taking full advantage of what's out there. Uh, and and of course, there is a, there is a impact on clean product yield. Uh, and, uh, and so we we recognize that and then, it's beneficial to the economics or we wouldn't be or we wouldn't be shifting that direction on, uh, on your first question, the improving refining. Operational performance. Thank you for recognizing that. It's true. Uh, and I would say that what you're seeing and what you saw in 25 and and we'll build on that momentum in 26 uh the precursors to that were set in motion almost 4 years ago, and we've been very diligent and uh and the results also reflect the momentum that
Speaker #10: Thank
Speaker #10: you. Yeah, Paul,
Rich Harbison: Yeah, Paul, I'll add to your second question first and maybe invite others to pile on. But we are maxed out heavy. We are taking full advantage of what's out there. And of course, there is an impact on clean product yield. And so we recognize that. And it's beneficial to the economics, or we wouldn't be shifting that direction. On your first question, the improving refining operational performance, thank you for recognizing that. It's true. And I would say that what you're seeing and what you saw in 2025 and we'll build on that momentum in 2026, the precursors to that were set in motion almost four years ago. And we've been very diligent. And the results also reflect the momentum that we have because we're not just waking up today and thinking about what we can do tomorrow.
Rich Harbison: Yeah, Paul, I'll add to your second question first and maybe invite others to pile on. But we are maxed out heavy. We are taking full advantage of what's out there. And of course, there is an impact on clean product yield. And so we recognize that. And it's beneficial to the economics, or we wouldn't be shifting that direction. On your first question, the improving refining operational performance, thank you for recognizing that. It's true. And I would say that what you're seeing and what you saw in 2025 and we'll build on that momentum in 2026, the precursors to that were set in motion almost four years ago. And we've been very diligent. And the results also reflect the momentum that we have because we're not just waking up today and thinking about what we can do tomorrow.
Speaker #3: I'll add to your second question first, and maybe invite others to pile on. But we are maxed out heavy. We are taking full advantage of what's out there.
that we have because we're not just waking up today and thinking about what we can do tomorrow, these things have been building and building over the last 4 years and so there's much more to come much more to do much more to accomplish and
Speaker #3: And of course, there is an impact on clean product yield, and so we recognize that. And it's beneficial to the economics, or we wouldn't be shifting that direction.
Speaker #3: On your first question, the improving, refining operational performance—thank you for recognizing that. It's true. And I would say that what you're seeing and what you saw in '25, and will build on that momentum in '26—the precursors to that were set in motion almost four years ago.
could m&a take a role in that certainly we've shown that for the right value creation opportunity like we saw with WRB we would add add to our refining capabilities. I think they're they're fairly rare and maybe could call them unicorns but if there are the occasional unicorns that come up we would certainly take a look at it. And if it added to our competitive Advantage particularly in the Mid-Continent or Gulf Coast, we would certainly take a hard look at things.
Thank you.
Speaker #3: And we've been very diligent, and the results also reflect the momentum that we have, because we're not just waking up tomorrow or today and thinking about what we can do—it's about the last four years.
Thanks Paul.
In Knoxville to Sean margolin with Wells Fargo, your line is open, please go ahead.
Rich Harbison: These things have been building and building over the last four years. And so there's much more to come, much more to do, much more to accomplish. And could M&A take a role in that? Certainly, we've shown that for the right value creation opportunity, like we saw with WRB, we would add to our refining capabilities. I think they're fairly rare and maybe could call them unicorns. But if there are the occasional unicorns that come up, we would certainly take a look at it. And if it added to our competitive advantage, particularly in the Midcontinent or Gulf Coast, we would certainly take a hard look at things.
Rich Harbison: These things have been building and building over the last four years. And so there's much more to come, much more to do, much more to accomplish. And could M&A take a role in that? Certainly, we've shown that for the right value creation opportunity, like we saw with WRB, we would add to our refining capabilities. I think they're fairly rare and maybe could call them unicorns. But if there are the occasional unicorns that come up, we would certainly take a look at it. And if it added to our competitive advantage, particularly in the Midcontinent or Gulf Coast, we would certainly take a hard look at things.
Speaker #3: And so, there's much more to come, much more to do, much more to accomplish. And could M&A take a role in that? Certainly. We've shown that for the right value creation opportunity, like we saw with WRB, we would add to our refining capabilities.
Thanks for taking the question. Um,
Maybe turning it back to Midstream. You you made a comment, you alluded to this post 2027 uh, growth opportunity. Um
Speaker #3: I think they're fairly rare, and maybe you could call them unicorns. But if there are the occasional unicorns that come up, we would certainly take a look at it.
And, you know, we have the 2027 ebita Target out there, but it does seem just like underpinned by fundamental. Trends goes
Speaker #3: And if it added to our competitive advantage, particularly in the Mid-Continent or Gulf Coast, we would certainly take a hard look at it.
Speaker #3: things. Thank
Um, and and underlying production and efficiency Trends. There is going to be a tail to your Midstream growth opportunity. And really the question is, how how you are going to frame that on a, on the spending side? You know, you've got some organic projects that are starting up this year next.
Speaker #1: you.
Paul Cheng: Thank you.
Paul Cheng: Thank you.
Speaker #3: Thanks,
Rich Harbison: Thanks, Paul.
Rich Harbison: Thanks, Paul.
Speaker #1: We now turn to Sam. Your line is open. Please go ahead, Margolin with Wells Fargo.
Operator: We now turn to Sam Margolin with Wells Fargo. Your line is open. Please go ahead.
Operator: We now turn to Sam Margolin with Wells Fargo. Your line is open. Please go ahead.
Speaker #11: Hi. Thanks
Sam Margolin: Hi. Thanks for taking the question. Maybe turning it back to midstream, you made a comment. You alluded to this post-2027 growth opportunity. And we have the 2027 EBITDA target out there, but it does seem just underpinned by fundamental trends, GORs, and underlying production and efficiency trends. There is going to be a tail to your midstream growth opportunity. And really, the question is how you are going to frame that on the spending side. You've got some organic projects that are starting up this year and next. Feels sort of like a peak spend. Maybe there's some operating leverage and some infill in those new assets, or there's an opportunity to accelerate spend. So just a question about how the midstream gas opportunity extends past 2027 and what that means for your capital framework.
Sam Margolin: Hi. Thanks for taking the question. Maybe turning it back to midstream, you made a comment. You alluded to this post-2027 growth opportunity. And we have the 2027 EBITDA target out there, but it does seem just underpinned by fundamental trends, GORs, and underlying production and efficiency trends. There is going to be a tail to your midstream growth opportunity. And really, the question is how you are going to frame that on the spending side. You've got some organic projects that are starting up this year and next. Feels sort of like a peak spend. Maybe there's some operating leverage and some infill in those new assets, or there's an opportunity to accelerate spend. So just a question about how the midstream gas opportunity extends past 2027 and what that means for your capital framework.
Speaker #11: For taking the ahead question—maybe turning it back to Midstream. You made a comment; you alluded to this post-2027 growth opportunity. And we have the 2027 EBITDA target out there, but it does seem just like it’s underpinned by GORs and underlying production and efficiency trends.
Feel sort of like a, a peak spend. Maybe there's some operating leverage and some infill in those new assets or, you know, there's an opportunity to accelerate spend. So, just a question about how, you know, the Midstream gas opportunity, extends past 2027 and what that means for your for your Capital framework.
Sure. I
you know, the way I think about the
Speaker #11: There is going to be a tail to your midstream growth opportunity. And really, the question is how you are going to frame that on the spending side.
Speaker #11: You’ve got some organic projects that are starting up this year and next. Feels sort of like a peak spend—maybe there’s some operating leverage and some infill in those new assets, or there’s an opportunity to accelerate spend.
Speaker #11: How does the midstream gas opportunity extend past 2027, and what does that mean for your capital? So, just a question about—
Speaker #11: framework. Sure.
Don Baldridge: Sure. The way I think about that, we've built this platform that has this now, I think, an organic opportunity flywheel that continues to bring additional opportunities that are low capital, high return, being able to add incremental volumes to our system. And we'll continue to have some of these chunkier buildouts. And we've talked about a gas plant every year or so. I think we're on that pace, additional fractionator. We're on that kind of pace. We'll have those types of additions. But in the interim, just lower capital, high return, both kind of buildout extensions of what we have from a platform, I think, will continue to carry day.
Donald J. Baldridge: Sure. The way I think about that, we've built this platform that has this now, I think, an organic opportunity flywheel that continues to bring additional opportunities that are low capital, high return, being able to add incremental volumes to our system. And we'll continue to have some of these chunkier buildouts. And we've talked about a gas plant every year or so. I think we're on that pace, additional fractionator. We're on that kind of pace. We'll have those types of additions. But in the interim, just lower capital, high return, both kind of buildout extensions of what we have from a platform, I think, will continue to carry day.
Speaker #3: The way I think about that, we've built this platform that has this now, I think, and that continues to bring additional opportunities. That organic opportunity flywheel is low capital, high return, being able to add incremental volumes to our system.
You know, now I think an organic opportunity flywheel that continues to bring, uh, additional opportunities that are low Capital High return, being able to add, uh, incremental volumes to our system. And we'll, we'll continue to have some of these, uh, chunkier uh, uh, buildout. And we've talked about, you know, about a gas plant every year or so. I think we're on that pace, uh, you know, additional fractionator on that. We're on that kind of pace where we'll have those types of additions. But in the interim just, uh, you know, lower Capital, High return, both kind of build out extensions of what we have from a, a platform I think will continue to carry day and and so what I've probably stepped back and just tell you that that momentum and that platform uh that we see is is just being able to generate those kinds of projects that will carry us Beyond 27 and be able to continue on that uh mid
Speaker #3: And we'll continue to have some of these chunkier build-outs. And we've talked about a gas plant every year or so. I think we're on that pace.
Speaker #3: Additional fractionator on that. We're on that kind of pace where we'll have those types of additions. But in the interim, just lower capital, high return, both kind of build-out extensions of what we have from a platform, I think, will continue to carry the day.
Single digits. But I'd also say it's not just in our NGL business, we're seeing opportunities uh in and around our crew to clean, uh, value chain that we continue to stay focused on and those are a lot of optimization projects around our pipes and terminals. So uh the the breadth of which we can we can execute within the Midstream space is is pretty impressive and pretty exciting.
Speaker #3: And so what I'd probably step back and just tell you is that momentum and that platform that we see is just being able to generate those kinds of projects that will carry us beyond '27 and be able to continue on that mid-single digits.
Don Baldridge: And so I'd probably step back and just tell you that momentum and that platform that we see is just being able to generate those kinds of projects that will carry us beyond '27 and be able to continue on that mid-single digits. But I'd also say it's not just in our NGL business. We're seeing opportunities in and around our crude-to-clean value chain that we continue to stay focused on. And those are a lot of optimization projects around our pipes and terminals. So the breadth of which we can execute within the midstream space is pretty impressive and pretty exciting.
Donald J. Baldridge: And so I'd probably step back and just tell you that momentum and that platform that we see is just being able to generate those kinds of projects that will carry us beyond '27 and be able to continue on that mid-single digits. But I'd also say it's not just in our NGL business. We're seeing opportunities in and around our crude-to-clean value chain that we continue to stay focused on. And those are a lot of optimization projects around our pipes and terminals. So the breadth of which we can execute within the midstream space is pretty impressive and pretty exciting.
Hey, Simon, it's Kevin. I also just like that. The Western Gateway, if that's a project that moves ahead, that, that is not in any of our current, um, projections and so that just further adds to the potential, um, for growth post 2027, if that goes ahead.
Speaker #3: But I'd also say it's not just in our NGL business—crude to clean value chain—that we continue to stay focused on. And those are a lot of optimization projects around our pipes and terminals.
Speaker #3: So the breadth of which we can execute within the midstream space is pretty impressive and pretty—
Understood. Okay, thank you and then maybe just a follow up on Kim's. Um, you know, it's an industry issue, not a, not a CPM or or a PSX issue. Um, but there is more capacity coming and, you know, maybe just your latest thoughts on on cams both strategically after this slate of projects, you have come online and and then in the near term, you know, mitigating some of these commodity challenges,
Speaker #3: exciting. Hey, Sam, it's
Kevin Mitchell: Sam, it's Kevin. I'd also just highlight that the Western Gateway, if that's a project that moves ahead, that is not in any of our current projections. And so that just further adds to the potential for growth post-2027 if that goes ahead.
Kevin Mitchell: Sam, it's Kevin. I'd also just highlight that the Western Gateway, if that's a project that moves ahead, that is not in any of our current projections. And so that just further adds to the potential for growth post-2027 if that goes ahead.
Speaker #1: Kevin, nice to also note that the Western Gateway—if that's a project that moves ahead—that is not in any of our current projections.
Speaker #1: And so, that just further adds to the potential for growth post-2027, if that goes ahead.
Sam Margolin: Understood. Okay. Thank you. And then maybe just to follow up on chems, it's an industry issue, not a CP Kim or a PSX issue. But there is more capacity coming. And maybe just your latest thoughts on chems, both strategically after this slate of projects you have come online and then in the near term, mitigating some of these commodity challenges.
Sam Margolin: Understood. Okay. Thank you. And then maybe just to follow up on chems, it's an industry issue, not a CP Kim or a PSX issue. But there is more capacity coming. And maybe just your latest thoughts on chems, both strategically after this slate of projects you have come online and then in the near term, mitigating some of these commodity challenges.
Speaker #11: Okay, thank you. And then maybe just to follow up on— understood, an industry issue, not a CPChem or a PSX issue. But there is more capacity coming, and maybe just your latest thoughts on Kim's, both strategically after this slate of projects, your term mitigating some of these commodity—
Certainly, I think that, uh, CPK is focused on getting those big projects up and operating they, they do see them, uh, being quite a creative even in this environment. And so they need to get those online and generating, uh, value, uh, but uh, and, and cpam has shown that they're quite resilient during this downturn, uh, generating, our share of their ibida 845 million in, in, in 2025 and, uh, what what needs to happen and is happening in the marketplace is is pretty large, scale rationalization, uh, on the order of 20 million, uh, tons per year. Uh, and that would get
Speaker #11: challenges.
Speaker #3: Certainly, I think
Rich Harbison: Certainly, I think that CP Kim is focused on getting those big projects up and operating. They do see them being quite accretive even in this environment. So they need to get those online and generating value. CP Kim has shown that they're quite resilient during this downturn, generating our share of their EBITDA, $845 million in 2025. What needs to happen and is happening in the marketplace is pretty large-scale rationalization on the order of 20 million tons per year. That would get the industry back to 85% utilization. Now, I'd note that right now, the US base is running at 90%. So the US is leveraging its cost advantages, its capabilities, while Asia Pacific and Europe are running at about 65%. They're on the bubble. They're on the ropes. That's where we think the bulk of the rationalization needs to occur.
Rich Harbison: Certainly, I think that CP Kim is focused on getting those big projects up and operating. They do see them being quite accretive even in this environment. So they need to get those online and generating value. CP Kim has shown that they're quite resilient during this downturn, generating our share of their EBITDA, $845 million in 2025. What needs to happen and is happening in the marketplace is pretty large-scale rationalization on the order of 20 million tons per year. That would get the industry back to 85% utilization. Now, I'd note that right now, the US base is running at 90%. So the US is leveraging its cost advantages, its capabilities, while Asia Pacific and Europe are running at about 65%. They're on the bubble. They're on the ropes. That's where we think the bulk of the rationalization needs to occur.
Speaker #3: CPCAM is focused on getting those big—see them being quite accretive, even in this environment. And so they need to get those online and generating value.
The industry backed 85% utilization. Now, I'd note that right now. The US base is running at 90% And so us is leveraging, its cost advantages. Its its capabilities uh while
Speaker #3: But CPCAM has shown that they're quite resilient, with projects up and operating during this downturn. They do share of their EBITDA—$845 million in 2025.
Speaker #3: And what needs to happen, and is happening in the marketplace, is pretty large-scale rationalization on the order of 20 million tons per year. And that would get the industry back to 85% utilization.
Speaker #3: Now, I'd note that right now, the U.S. base is running at 90%. And so the U.S. is leveraging its cost advantages, its capabilities, while Asia Pacific and Europe are running at about 65%.
Speaker #3: So, they're on the bubble. They're on the ropes. And that's where we think the bulk of the rationalization needs to occur. We saw 5 million metric tons a year come off in '25.
Asia-pacific and Europe are running at about 65%. So they're on the bubble, they they're on, they're on the roads. And that's where we think the bulk of the rationalization needs to occur. We saw 5 million metric tons a year come off in 25. Uh, we expect another 5 to 7 coming out of, uh, southeast Asia, uh, in in this year and next and then, uh, and additional rationalization and half the crackers in Europe to tighten things up. Uh, and then the, the new builds that are out there beyond what we see at Golden Triangle and Ross lefon, uh, are primarily in China and there's not a lot of clarity around those. When they will come up there were, you know, you know, stories of them being operational, but not actually being run, uh, in 25. And so that's, that's a, that's, that's a little bit fuzzier. And I typically, uh, it takes longer for those assets to come on.
Rich Harbison: We saw 5 million metric tons a year come off in 2025. We expect another 5 to 7 coming out of Southeast Asia in this year and next, and then additional rationalization on NAFTA crackers in Europe to tighten things up. And then the new builds that are out there beyond what we see at Golden Triangle and Ras Laffan are primarily in China. And there's not a lot of clarity around those when they will come up. There were stories of them being operational but not actually being run in 2025. And so that's a little bit fuzzier. And typically, it takes longer for those assets to come on. And they will be; they'll only be brought on when the Chinese think that they might be useful. And so that continues to push out.
Rich Harbison: We saw 5 million metric tons a year come off in 2025. We expect another 5 to 7 coming out of Southeast Asia in this year and next, and then additional rationalization on NAFTA crackers in Europe to tighten things up. And then the new builds that are out there beyond what we see at Golden Triangle and Ras Laffan are primarily in China. And there's not a lot of clarity around those when they will come up. There were stories of them being operational but not actually being run in 2025. And so that's a little bit fuzzier. And typically, it takes longer for those assets to come on. And they will be; they'll only be brought on when the Chinese think that they might be useful. And so that continues to push out.
Speaker #3: We expect another five to seven coming out of Southeast Asia, this year and next. And then additional rationalization on after-crackers in Europe to tighten things up.
And they will be uh the they'll only be brought on when the Chinese think that they might be useful. And so that continues to to push out.
Thanks so much.
You're welcome.
May I send you Matthew Blair with tph. Your line is open. Please go ahead.
Speaker #3: And then the new builds that are out there, beyond what we see at Golden Triangle and Roswell Fund, are primarily in China. And there's not a lot of clarity around those, when they will come up.
Speaker #3: There were stories of them being operational but not actually being run in '25. And so that's a little bit fuzzier. And typically, it takes longer for those assets to come on.
Speaker #3: And they will be—they'll only be brought on when the Chinese think that they might be useful. And so that continues to push out.
Completely oriented to the uh export Market or or do you think like a 50/50 domestic? Export split would be reasonable and then finally for the ethane Supply does that all come from CSX or do you have any sort of contracts with third-party ethane providers? Thanks?
Speaker #11: Thanks so
Sam Margolin: Thanks so much.
Sam Margolin: Thanks so much.
Speaker #11: much. You're
Rich Harbison: You're welcome.
Rich Harbison: You're welcome.
Speaker #1: We now welcome and turn to Matthew Blair with TPH. Your line is open. Please go ahead.
Operator: We now turn to Matthew Blair with TVH. Your line is open. Please go ahead.
Operator: We now turn to Matthew Blair with TVH. Your line is open. Please go ahead.
Speaker #4: Great, thank you, and good morning. Maybe to stick on Kim's here—could you talk a little bit more about the modeling considerations for your Gulf Coast cracker and PE plant that's scheduled to come online later this year?
Matthew Blair: Great. Thank you. Good morning. Maybe to stick on CP Chem's here, could you talk a little bit more about the modeling considerations for your Gulf Coast cracker and NTE plant that's scheduled to come online later this year? Do you think that Q3 is a good startup target? And if so, how long would that take to ramp? In terms of the sales split, would that be completely oriented to the export market, or do you think a 50/50 domestic export split would be reasonable? And then finally, for the ethane supply, does that all come from PSX, or do you have any sort of contracts with third-party ethane providers? Thanks.
Matthew Blair: Great. Thank you. Good morning. Maybe to stick on CP Chem's here, could you talk a little bit more about the modeling considerations for your Gulf Coast cracker and NTE plant that's scheduled to come online later this year? Do you think that Q3 is a good startup target? And if so, how long would that take to ramp? In terms of the sales split, would that be completely oriented to the export market, or do you think a 50/50 domestic export split would be reasonable? And then finally, for the ethane supply, does that all come from PSX, or do you have any sort of contracts with third-party ethane providers? Thanks.
Speaker #4: Do you think that Q3 is a good startup target? And if so, how long would that take to ramp? In terms of the sales split, would that be completely oriented to the export market, or do you think like a 50/50 domestic-export split would be reasonable?
Yeah, thanks Matt. Uh, those assets should be commissioning and and really starting up in the fourth quarter and then ramping up uh through at least the first half of of 27. Uh, and and given where we are today. It's it's going to be largely export oriented, uh, and certainly initially, uh, they'll always want to repatriate as much that volume as they can. But starting up it'll be it'll be primarily export oriented as far as the sourcing of ethane.
The majority of it is coming from us, but they certainly have connectivity to uh ensure that they have the best possible situation in and uh and multiple sources of ethane.
Speaker #4: And then, finally, for the ethane supply—does that all come from CSX, or do you have any sort of contracts with third-party ethane providers?
Speaker #4: Thanks.
Speaker #3: Yeah, thanks, Matt. Those assets should be commissioning and really starting up in the fourth quarter and then ramping up through at least the first half of '27.
Rich Harbison: Yeah. Thanks, Matt. Those assets should be commissioning and really starting up in Q4 and then ramping up through at least the first half of 2027. And given where we are today, it's going to be largely export-oriented. And certainly, initially, they'll always want to repatriate as much of that volume as they can. But starting up, it'll be primarily export-oriented. As far as the sourcing of ethane, the majority of it is coming from us. But they certainly have connectivity to ensure that they have the best possible situation and multiple sources of ethane.
Rich Harbison: Yeah. Thanks, Matt. Those assets should be commissioning and really starting up in Q4 and then ramping up through at least the first half of 2027. And given where we are today, it's going to be largely export-oriented. And certainly, initially, they'll always want to repatriate as much of that volume as they can. But starting up, it'll be primarily export-oriented. As far as the sourcing of ethane, the majority of it is coming from us. But they certainly have connectivity to ensure that they have the best possible situation and multiple sources of ethane.
Speaker #3: And given where we are today, it's going to be largely export-oriented. And certainly, initially, they'll always want to repatriate as much of that volume as they can, but starting up, it'll be primarily export-oriented.
Sounds good. And then you mentioned the LA shutdown impact on OPC cost within the fourth quarter, which which, we found very helpful. Do you have a similar number if there is 1 on the LA shutdown impact for uh margin capture in the fourth quarter. And and I guess the reason I ask is if I look at your margin capture in 2025 versus 2024, it looks like it came down about a percentage point and some of your peers are are talking.
Speaker #3: As far as the sourcing of ethane, the majority of it is coming from us, but they certainly have connectivity to ensure that they have the best possible situation and multiple sources of ethane.
Speaker #4: Sounds good. And then, you mentioned the LA shutdown impact on op costs in the fourth quarter, which we found very helpful. Do you have a similar number, if there is one, on the LA shutdown impact for margin capture in the fourth quarter?
Matthew Blair: Sounds good. Then you mentioned the LA shutdown impact on op costs in the fourth quarter, which we found very helpful. Do you have a similar number, if there is one, on the LA shutdown impact for margin capture in the fourth quarter? I guess the reason I ask is if I look at your margin capture in 2025 versus 2024, it looks like it came down about a percentage point. Some of your peers are talking about how their margin capture increased year-over-year. Of course, these indicators aren't exactly apples to apples. But maybe you could just help us understand if there were any sort of unique headwinds to your margin capture in 2025. Thank you.
Matthew Blair: Sounds good. Then you mentioned the LA shutdown impact on op costs in the fourth quarter, which we found very helpful. Do you have a similar number, if there is one, on the LA shutdown impact for margin capture in the fourth quarter? I guess the reason I ask is if I look at your margin capture in 2025 versus 2024, it looks like it came down about a percentage point. Some of your peers are talking about how their margin capture increased year-over-year. Of course, these indicators aren't exactly apples to apples. But maybe you could just help us understand if there were any sort of unique headwinds to your margin capture in 2025. Thank you.
Yeah, this Rich. Um Los Angeles Refinery when we step back and look at it and you know when we're making the decision here to uh the the the fate of the asset and the operation um it was very clear to us on 2 things 1. The the cost to produce was very high.
Speaker #4: And I guess the reason I ask is, if I look at your margin capture in 2025 versus 2024, it looks like it came down about a percentage point. And some of your peers are talking about how their margin capture increased year over year.
Speaker #4: And of course, these indicators aren't exactly apples to apples, but maybe you could just help us understand if there were any sort of unique headwinds to your margin capture in 2025.
Speaker #4: Thank you.
Speaker #3: This is Rich. Los Angeles Refinery—when we step back and look at it, when we're making the decision here on the fate of the asset and the operation, it was very clear to us on two things.
Rich Harbison: This is Rich. Los Angeles refinery, when we step back and look at it and we're making the decision here to the fate of the asset and the operation, it was very clear to us on two things. One, the cost to produce was very high. And the materiality of the earnings was very low, if not negative, in a number of cases. And the outlook on capital recapitalization of the asset was also very, very high. So when I think about it, it is not material to the earnings side of the business, the shutdown. And the market capture on an overall system basis, if you think about it, there was a 135,000-barrel-a-day facility and a 2 million-barrel-a-day operation. So it was not extraordinarily material either on the overall system. So I would say non-material on market capture and non-material on earnings.
Rich Harbison: This is Rich. Los Angeles refinery, when we step back and look at it and we're making the decision here to the fate of the asset and the operation, it was very clear to us on two things. One, the cost to produce was very high. And the materiality of the earnings was very low, if not negative, in a number of cases. And the outlook on capital recapitalization of the asset was also very, very high. So when I think about it, it is not material to the earnings side of the business, the shutdown. And the market capture on an overall system basis, if you think about it, there was a 135,000-barrel-a-day facility and a 2 million-barrel-a-day operation. So it was not extraordinarily material either on the overall system. So I would say non-material on market capture and non-material on earnings.
And the materiality of the earnings was very low if not negative in a number of cases. So, uh, and the outlook on on Capital re re capitalization of the asset was also very, very high. So what, what? I think about it, it it, it, it is not, uh, material to the earning side of the business, the shutdown. And the, the market capture on an overall system basis is, if you think about it. Uh the there was 135,000 Barrel a day facility and a 2 million Barrel a day operation. So it was not extraordinarily material either on the overall system. So I, I I, I would say non-material and Market capture and non-material on earnings,
Got it. Thank you.
Speaker #3: One, the cost to produce was very high. And the materiality of the earnings was very low, if not negative, in a number of cases.
3, now sent to Jason cablemen with TD Cohen. Your line is open. Please go ahead.
Speaker #3: So the outlook on capital recapitalization of the asset was also very high. So when I think about it, it is not material to the earnings side of the business, the shutdown.
Speaker #3: And the market capture on an overall system basis is, if you think about it, there was a 135,000 barrels-a-day facility and a 2 million barrels-a-day operation.
Speaker #3: So it was not extraordinarily material either on the overall system. So I would say non-material in market capture and non-material on—
Speaker #3: So, it was not extraordinarily material either on the overall system. So, I would say non-material on market capture and non-material on earnings. Got it.
Yeah. Hey um, most of my questions have been answered but maybe if I could just um, touch on the Midstream guidance, because it sounded like the ramp up from the new projects wouldn't really hit, um, until the second half of this year. Um, so wondering if you're seeing any headwinds in the first half from recontracting on the NGL pipes and, and if that's a something that'll be a feature in, uh, future years. And, and then also, um, anything specifically in forq, that that resulted in a step up, in, in Opex, which looked a bit. Hi, thanks.
Matthew Blair: Got it. Thank you.
Matthew Blair: Got it. Thank you.
Speaker #4: Thank you.
Speaker #1: We now turn to Jason Gabelman with TD Cowen. Your line is open. Please go ahead.
Operator: We now turn to Jason Gabelman with TD Cowen. Your line is open. Please go ahead.
Operator: We now turn to Jason Gabelman with TD Cowen. Your line is open. Please go ahead.
Speaker #1: ahead. Yeah.
Jason Gabelman: Yeah. Hey. Most of my questions have been answered. But maybe if I could just touch on the midstream guidance because it sounded like the ramp-up from the new projects wouldn't really hit until the second half of this year. So wondering if you're seeing any headwinds in the first half from recontracting on the NGL pipes and if that's something that'll be a feature in future years. And then also, anything specifically in Q4 that resulted in a step-up in OPEX, which looked a bit high. Thanks.
Jason Gabelman: Yeah. Hey. Most of my questions have been answered. But maybe if I could just touch on the midstream guidance because it sounded like the ramp-up from the new projects wouldn't really hit until the second half of this year. So wondering if you're seeing any headwinds in the first half from recontracting on the NGL pipes and if that's something that'll be a feature in future years. And then also, anything specifically in Q4 that resulted in a step-up in OPEX, which looked a bit high. Thanks.
Speaker #5: Hey, most of my questions have been answered, but maybe if I could just touch on the midstream guidance, because it sounded like the ramp-up from the new projects wouldn't really hit until the second half of this year.
Speaker #5: So, wondering if you're seeing any headwinds in the first half from recontracting on the NGL pipes, and if that's something that'll be a feature in future years.
Um, in terms of the first half of this year, I I think we're going to see ourselves pretty pretty close and pretty flat on that, uh, billion dollar quarter run rate. I think that's pretty, uh, pretty well set. You know, that manufacturers in, um, like you mentioned some contract renewals that factors in, uh, contract fee escalations are all in there. Um, so I I think that, uh, will stay fairly steady and you, you'll see the uptick really when we start filling in some of these organic growth projects. Um and we're terms in terms of uh Opex to the fourth quarter as really just sort of timing and season.
Speaker #5: And then also, anything specifically in Q4 that resulted in a step-up in OPEX, which looked a bit high? Thanks.
Speaker #3: Hey, Jason. Yeah. In terms of the first half of this year, I think we're going to see ourselves pretty close and pretty flat on that $1 billion quarter run rate.
Don Baldridge: Hey, Jason. Yeah. In terms of the first half of this year, I think we're going to see ourselves pretty close and pretty flat on that billion-dollar quarter run rate. I think that's pretty well set. That factors in, like you mentioned, some contract renewals. It factors in contract fee escalations. They're all in there. So I think that will stay fairly steady. And you'll see the uptick really when we start filling in some of these organic growth projects. And in terms of OPEX in Q4, that's really just sort of timing and seasonality. I think if you look at us over multiple quarters and years, we've spent a lot of time talking about extracting costs out of the refining business.
Donald J. Baldridge: Hey, Jason. Yeah. In terms of the first half of this year, I think we're going to see ourselves pretty close and pretty flat on that billion-dollar quarter run rate. I think that's pretty well set. That factors in, like you mentioned, some contract renewals. It factors in contract fee escalations. They're all in there. So I think that will stay fairly steady. And you'll see the uptick really when we start filling in some of these organic growth projects. And in terms of OPEX in Q4, that's really just sort of timing and seasonality. I think if you look at us over multiple quarters and years, we've spent a lot of time talking about extracting costs out of the refining business.
Speaker #3: I think that's pretty well set. That factors in, like you mentioned, some contract renewals. It factors in contract fee escalations—they're all in there.
Speaker #3: So, I think that will stay fairly steady, and you'll see the uptick really when we start filling in some of these organic growth projects.
Obviously some seasonality and some quarter and a quarter timing but really pleased with the performance from an operation standpoint.
All right, I'll leave it there. Thanks.
Speaker #3: And in terms of OPEX in the fourth quarter, that's really just sort of timing and seasonality. I think if you look at us over multiple quarters and years, we've spent a lot of time talking about extracting costs out of the refining business, and some of those successes have blended over into the midstream because the team there has also been able to grab some efficiencies through the scale that we've built and be able to leverage what we have at Phillips in total.
This concludes the question and answer session and I'll send a call back over to Sean Maha for closing the comments.
Thank you all for your interest in Philips 66. If you have any questions or feedback after today's call, please feel free to reach out to Kirk or myself.
Don Baldridge: And some of those successes have blended over into the midstream because the team there has also been able to grab some efficiencies through the scale that we've built and be able to leverage what we have at Phillips and Total. And so we're seeing really, I think, a healthy operating discipline there from a cost standpoint. But there's obviously some seasonality and some quarter-to-quarter timing. But really pleased with the performance from an operations standpoint.
Donald J. Baldridge: And some of those successes have blended over into the midstream because the team there has also been able to grab some efficiencies through the scale that we've built and be able to leverage what we have at Phillips and Total. And so we're seeing really, I think, a healthy operating discipline there from a cost standpoint. But there's obviously some seasonality and some quarter-to-quarter timing. But really pleased with the performance from an operations standpoint.
Speaker #3: And so we're seeing a really, I think, a healthy operating discipline there from a cost standpoint. But there's obviously some seasonality and some quarter-to-quarter timing, but really pleased with the performance from an operations standpoint.
Speaker #5: All right. I'll leave it there.
Speaker #5: All right. I'll leave it there. Thanks.
Jason Gabelman: All right. I'll leave it there. Thanks.
Jason Gabelman: All right. I'll leave it there. Thanks.
Speaker #1: That concludes the question-and-answer session. I'll now turn the call back over to Sean Maher for closing remarks.
Operator: This concludes the question-and-answer session. I'll turn the call back over to Sean Maher for closing comments.
Operator: This concludes the question-and-answer session. I'll turn the call back over to Sean Maher for closing comments.
Speaker #1: Comments. Thank you all for your interest.
Sean Maher: Thank you all for your interest in Phillips 66. If you have any questions or feedback after today's call, please feel free to reach out to Kirk or myself.
Sean Maher: Thank you all for your interest in Phillips 66. If you have any questions or feedback after today's call, please feel free to reach out to Kirk or myself.
