Phillips 66 (NYSE:PSX) management used its fourth-quarter and full-year 2025 earnings call to highlight what CEO Mark Lashier described as “strong financial and operating results,” driven by higher refining utilization, record clean product yields, and continued momentum in Midstream volumes. Executives also outlined cost and growth targets stretching through 2027, while reiterating a shareholder returns framework centered on dividends, buybacks, and debt reduction.
Leadership emphasizes safety, portfolio actions, and operating improvement
Lashier said 2025 was the company’s “best year ever for safety performance,” calling safety foundational to the operating model. He also pointed to several strategic actions taken during the year, including acquiring the remaining 50% interest in the WRB joint venture, selling a 65% interest in the Germany and Austria retail marketing business, and idling the Los Angeles refinery.
Midstream targets $4.5 billion run-rate Adjusted EBITDA by 2027
Midstream and Chemicals executive Don Baldridge said the segment has increased adjusted EBITDA by 40% since 2022 and delivered approximately $1 billion of adjusted EBITDA in the fourth quarter of 2025. He attributed growth to portfolio simplification, acquisitions (including Pinnacle and Coastal Bend), and expansions such as the Sweeny Hub and Dos Picos II.
Baldridge laid out a target of approximately $4.5 billion run-rate Adjusted EBITDA by year-end 2027, supported by a mix of organic projects and scale-driven opportunities. He said Phillips 66 expects to add a gas plant about every 12 to 18 months due to its footprint in the Permian Basin, noting Dos Picos II was commissioned in 2025 and the Iron Mesa gas plant is expected to be in service in early 2027.
He also said the first phase of the Coastal Bend pipeline expansion was completed, with incremental capacity of 125,000 barrels per day expected online in late 2026. Beyond large projects, Baldridge said the team continues to identify “low-capital, high-return” organic opportunities across basins, positioning the segment for mid-single-digit adjusted EBITDA growth.
Fourth-quarter results: adjusted earnings of $1.0 billion; working capital tailwind and asset sale proceeds
CFO Kevin Mitchell reported fourth-quarter reported earnings of $2.9 billion, or $7.17 per share, and adjusted earnings of $1.0 billion, or $2.47 per share. He said both reported and adjusted results included the final $239 million pre-tax impact of accelerated depreciation tied to idling the Los Angeles refinery.
Mitchell said quarterly capital spending was $682 million and operating cash flow was $2.8 billion. Phillips 66 returned $756 million to shareholders, including $274 million of share repurchases. Net debt to capital ended the quarter at 38%.
On cash flow, Mitchell said operations benefited from a $708 million working capital benefit tied to inventory reduction, partly offset by the impact of falling prices on the net receivables and payables position. The company also received $1.5 billion from the sale of a 65% interest in its Germany and Austria retail marketing business, repaid over $2 billion in debt, and completed the acquisition of the remaining 50% interest in WRB. Ending cash was $1.1 billion.
Mitchell said total company adjusted earnings were flat sequentially at $1.0 billion, with improvements in Refining, Renewable Fuels, and Midstream mostly offset by declines in Chemicals and Marketing and Specialties. He attributed Chemicals weakness primarily to lower polyethylene margins driven by lower sales prices, while Marketing and Specialties declined largely due to the Germany and Austria sale and seasonally lower domestic margins.
Refining: heavy crude optionality, cost initiatives, and capacity increases
On the Central Corridor (PADD 2), Marketing and Commercial executive Brian Mandell described the region as Phillips 66’s “maximum integration” of refining, midstream, and marketing. He said the company is one of the largest importers of Canadian crude and has optionality across Cushing grades and “advantaged crudes” from the wellhead. Mandell also cited company sensitivities indicating that each $1 change in the crude differential is worth about $140 million in yearly earnings.
Refining executive Rich Harbison discussed controllable costs, stating fourth-quarter performance was $5.96 per barrel, and said excluding Los Angeles wind-down costs, the quarter would have been approximately $5.50 to $5.57 per barrel. He cited higher natural gas pricing as a $0.13 per barrel headwind in the quarter and said the idled Los Angeles refinery should be a positive influence of about $0.30 per barrel on an annualized basis in 2026. Harbison added the company is targeting another $0.15 per barrel reduction by year-end 2026, supported by “over 300 initiatives.”
Harbison also said Phillips 66 is planning to update stated capacities at several refineries, citing improved operating rates and completed projects. He outlined the following changes:
- Billings: 66,000 bpd to 71,000 bpd
- Ponca City: 217,000 bpd to 228,000 bpd
- Bayway: 258,000 bpd to 275,000 bpd
- Sweeny: 265,000 bpd to 277,000 bpd
Harbison characterized the net increase as about 35,000 bpd, or roughly a 2% increase across the system. He also said the company has become more disciplined in turnarounds, including taking work out of turnarounds by completing it elsewhere and using tools such as machine learning to shorten duration and reduce financial impact.
2026 outlook: utilization expectations, costs, and turnaround spending
Mitchell provided early 2026 guidance, including a first-quarter global O&P utilization rate expected in the mid-90s. For Refining, he said worldwide crude utilization is expected in the low 90s. First-quarter turnaround expense is expected to be $170 million to $190 million, with full-year turnaround expense guidance of $550 million to $600 million. Corporate and other costs are expected to be $400 million to $420 million in the first quarter and $1.5 billion to $1.6 billion for the full year, and depreciation and amortization is expected to be $2.1 billion to $2.3 billion. Beginning in 2026, costs associated with the idled Los Angeles refinery will be reported in corporate and other.
In the Q&A, management also discussed crude market dynamics, including Venezuelan crude and Canadian heavy differentials. Lashier said Phillips 66 has stated it can process about 250,000 bpd of Venezuelan crude and emphasized the company’s flexibility, adding it does not need to spend incremental capital to do so. Mandell said the market is forward-looking, pointing to WCS differentials for 2026 as weaker versus 2025 levels and said both physical barrels and expectations for continued supply were influencing spreads.
On capital allocation, Mitchell reiterated the company’s commitment to returning greater than 50% of net operating cash flow to shareholders through dividends and repurchases, while maintaining a conservative balance sheet. He said that under a framework assuming roughly $8 billion in operating cash flow, and with a dividend around $2 billion annually and a capital program of $2.4 billion, the remaining cash could be split between debt reduction and buybacks, with share repurchases “slightly weighted” within that split. Mitchell said the company expects it can reduce debt by about $1.5 billion per year over the next two years, excluding any additional asset disposition flexibility.
About Phillips 66 (NYSE:PSX)
Phillips 66 (NYSE: PSX) is an independent energy manufacturing and logistics company engaged primarily in refining, midstream transportation, marketing and chemicals. The company processes crude oil into transportation fuels, lubricants and other petroleum products, operates pipeline and storage infrastructure, and participates in petrochemical production through strategic investments. Phillips 66 serves commercial, industrial and retail customers and positions its operations across the value chain of the downstream energy sector.
The company’s principal activities include refining crude oil into gasoline, diesel, jet fuel and feedstocks for petrochemical production; operating midstream assets such as pipelines, terminals and fractionators that move and store crude oil and natural gas liquids; and marketing and distributing fuels and lubricants through wholesale and retail channels.
